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marco primerano
on Oct 11, 2024

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When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will:

A) fluctuate in direct proportion to changes in production.
B) remain constant.
C) fluctuate inversely with changes in production.
D) be greater than net operating income under absorption costing.

Variable Costing

An accounting method that only includes variable costs—costs that vary with production levels—when calculating the cost of producing a good or service.

Net Operating Income

The profit generated from a company’s everyday business operations, calculated by subtracting operating expenses from revenue.

Units Produced

The total number of units created by a production process over a specific period of time.

  • Appreciate the relationship between production and sales volumes and net operating income in the context of both costing methods.
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JK
Jacquie KissamisOct 15, 2024
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