Routsong Corporation Had the Following Sales and Production for the Past

question 235

Multiple Choice

Routsong Corporation had the following sales and production for the past four years: Selling price per unit, variable cost per unit, and total fixed cost are the same each year. There were no beginning inventories in Year 1. Which of the following statements is NOT correct?

• A)Under variable costing, net operating income for Year 1 and Year 2 would be the same.
• B)Because of the changes in production levels, under variable costing the unit product cost will change each year.
• C)The total net operating income for all four years combined would be the same under variable and absorption costing.
• D)Under absorption costing, net operating income in Year 4 would be less than the net operating income in Year 2.

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Definitions:

Lockbox System

A service provided by banks to companies for the collection of payments from customers, whereby payments are sent to a special post office box instead of to the company.

Cash Concentration Account

A bank account used by companies to consolidate and manage cash from multiple locations or accounts, improving liquidity management.

Collection Float

The time delay between when a check is written and when it is actually deducted from the payer's account, impacting the receiver's cash flow.

Disbursement Float

The time delay between when a check is issued and when the funds are actually withdrawn from the payer's account.