King Tooling has produced and sold the following number of units of their only product during their

Question:

King Tooling has produced and sold the following number of units of their only product during their first two years in business:

___________________________________Produced ___________ Sold

Year ended December 31, Year 1 ............. 50,000 .............40,000

Year ended December 31, Year 2 ............. 50,000 .............55,000

Production costs per unit have not changed over the two-year period. Under variable costing, what is the amount of cost of sales relative to the cost of sales shown on the GAAP income statement of the company?

Year 1 ___________ Year 2

a. Higher .............Higher

b. Higher .............Lower

c. Lower .............Higher

d. Lower .............Lower

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...