Where the Fixed Overhead Rate in Both Opening and Closing

question 63

Multiple Choice

Where the fixed overhead rate in both opening and closing inventories is the same, which of the following statements is correct?

• A) If inventory remains the same, absorption costing profit will be greater than variable costing profit.
• B) If inventory has decreased, absorption costing profit will be greater than variable costing profit.
• C) Absorption costing profit is always greater than variable costing profit.
• D) If inventory has increased, absorption costing profit will be greater than variable costing profit.

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Definitions:

Null Hypothesis

A hypothesis that asserts there is no significant difference or effect and serves as the default assumption to be tested against an alternative hypothesis.

Chi-square Statistic

A statistical test used to determine if there's a significant difference between observed frequencies and expected frequencies in categorical data.

Degrees of Freedom

The number of independent pieces of information used in the calculation of a statistic, often associated with the complexity of the data.

Degrees of Freedom

The number of independent pieces of information available to estimate another datum or parameter in a statistical analysis.