Smiles Entertainment Had the Following Accounts and Balances at December

question 148

Multiple Choice

Smiles Entertainment had the following accounts and balances at December 31: Using the information in the table, calculate the company's reported net income for the period.

• A)$1,100.
• B)$4,000.
• C)$4,500.
• D)$10,400.
• E)$5,500.

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Definitions:

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs, excluding fixed manufacturing overhead from product cost calculations.

Net Operating Income

The income generated from normal business operations after deducting operating expenses such as wages and cost of goods sold, excluding income from investments and other non-operational sources.

Variable Costing

An accounting method that only considers variable costs (costs that change with production levels) in product costing and decision-making.

Absorption Costing

A bookkeeping approach that encompasses the total expenses of production, including direct materials, direct labor, along with both variable and fixed overhead costs, into the pricing of a product.