Assuming the Number of Units Sold and Produced Are the Same

question 50

Multiple Choice

Assuming the number of units sold and produced are the same, which of the following statements is true when comparing net operating income using absorption and variable costing?

• A) Absorption costing will yield a higher net operating income.
• B) Variable costing will yield a higher net operating income.
• C) Net operating income will be the same under both methods.
• D) Variable costing will have higher sales revenue.

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Definitions:

Required Return

This is the minimum return an investor expects to receive on an investment, factor in the risk involved.

Equity Securities

Financial assets that represent ownership in a corporation, such as stocks, entitling holders to a share of the company's profits and assets.

Future Cash Flows

Estimated amounts of money to be received or paid out in the future, critical for financial analysis and valuation.