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Company A sells a single product for $20 per unit. Additional data for the company's first month of operations are as follows: Unit variable manufacturing costs Total fixed manufacturing costs Unit variable selling and administrative expenses Total fixed selling and administrative expenses $14.50 $14,000 $2.00 $6,000 During the month, Company A produced 8,000 units. At month end, 500 units remained in ending inventory. Which of the following statements is TRUE? Absorption costing produces operating income that is $875 higher than variable costing. Absorption costing produces operating income that is $13,125 higher than variable costing. Absorption costing produces operating income that is $13,125 lower than variable costing. O Absorption costing produces operating income that is $875 lower than variable costing.

Company A sells a single product for $20 per unit. Additional data for the company's first month of operations are as follows: Unit variable manufacturing costs Total fixed manufacturing costs Unit variable selling and administrative expenses Total fixed selling and administrative expenses $14.50 $14,000 $2.00 $6,000 During the month, Company A produced 8,000 units. At month end, 500 units remained in ending inventory. Which of the following statements is TRUE? Absorption costing produces operating income that is $875 higher than variable costing. Absorption costing produces operating income that is $13,125 higher than variable costing. Absorption costing produces operating income that is $13,125 lower than variable costing. O Absorption costing produces operating income that is $875 lower than variable costing.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
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Company A sells a single product for $20 per unit. Additional data for the company's first month of operations are as follows: Unit variable manufacturing costs Total fixed manufacturing costs Unit variable selling and administrative expenses Total fixed selling and administrative expenses $14.50 $14,000 $2.00 $6,000 During the month, Company A produced 8,000 units. At month end, 500 units remained in ending inventory. Which of the following statements is TRUE? Absorption costing produces operating income that is $875 higher than variable costing. Absorption costing produces operating income that is $13,125 higher than variable costing. Absorption costing produces operating income that is $13,125 lower than variable costing. O Absorption costing produces operating income that is $875 lower than variable costing.
Transcribed Image Text:Company A sells a single product for $20 per unit. Additional data for the company's first month of operations are as follows: Unit variable manufacturing costs Total fixed manufacturing costs Unit variable selling and administrative expenses Total fixed selling and administrative expenses $14.50 $14,000 $2.00 $6,000 During the month, Company A produced 8,000 units. At month end, 500 units remained in ending inventory. Which of the following statements is TRUE? Absorption costing produces operating income that is $875 higher than variable costing. Absorption costing produces operating income that is $13,125 higher than variable costing. Absorption costing produces operating income that is $13,125 lower than variable costing. O Absorption costing produces operating income that is $875 lower than variable costing.
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