Shalom Company manufactures 50,000 units of a product and sells 40,000 units. Total manufacturing cost per unit
Question:
Shalom Company manufactures 50,000 units of a product and sells 40,000 units. Total manufacturing cost per unit is P50 (variable manufacturing cost, P10; fixed manufacturing cost, P40). Assuming no beginning inventory, what is the effect on net income if absorption costing is used instead of variable costing?
net income is P200,000 higher
net income is P400,000 higher
net income is the same
net income is P400,000 lower
Management will most likely prefer a low degree of operating leverage if
The operations incurred very high fixed costs.
The operations are very unprofitable.
There is an expected decrease in sales volume.
There is an expected increase in sales volume.
When using CVP analysis to determine sales level for a desired amount of profit, the profit is treated as an additional cost to be covered.
Select one:
True
False
Variable costing is also known as
Direct costing
Target costing
Standard costing
Indirect costing.
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello