When the units sold exceed the units produced operating income?

Terms in this set (73) If the number of units produced exceeds the number of units sold, then net operating income under absorption costing will: be equal to the net operating income under variable costing.

When the number of units produced is greater than the number of units sold?

If units produced are greater than units sold: absorption costing net operating income is greater than variable costing net operating income. (Fixed manufacturing overhead is deferred in inventory under absorption costing. This results in lower costs and higher net operating income.)

When units sold exceed units produced absorption costing income will be lower than variable costing income?

Absorption costing income exceeds variable costing income when units produced are *greater than units sold. If the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income.

What is the effect on net income if the sales units exceed the production units?

Sales greater than Production. This will result in net income under variable costing being greater than under absorption costing. With absorption costing, all manufacturing costs are captured in the finished goods inventory account, and as those goods are sold, those costs become expenses.

When production exceeds sales the net operating income reported under absorption costing is?

When production exceeds sales, the net operating income reported under absorption costing generally will be: greater than net operating income reported under variable costing.

How can you increase net operating income without increasing sales under absorption costing?

Therefore, when production exceeds sales, less of the fixed production costs is expensed as cost of goods sold in the current year. A lower expense for cost of goods sold will result in a higher operating income.

When units produced are less than units sold income under absorption?

When units produced are less than units sold, income under absorption costing is higher than income under variable costing. 2.

When using absorption costing when production is greater than sales a portion of fixed overhead is allocated to?

Under absorption costing, fixed overhead is allocated to products sold, so when production is greater than units sold, net income will be _______ (greater, less) than income calculated under variable costing. Brother Company uses variable costing.

When inventory increases absorption costing net operating income is higher than variable?

When inventory increases, absorption costing net operating income is higher than variable costing net income but to the fix manufacturing overhead: Deferred in the inventory account on the balance sheet. When the number of units produced equals the number of units sold: no change in inventories occurs.

Which of the following statements is true concerning income if production exceeds units sold?

Which of the following statements is true concerning income if production exceeds units sold? A higher operating income will result under an absorption costing income statement.

When production exceeds sales net operating income reported under variable costing generally will be?

When sales exceed production, the net operating income reported under variable costing generally will be: greater than net operating income reported under absorption costing.

When production is greater than sales operating income is greater under absorption cost than under variable costing?

When production is greater than sales, i.e. ending inventory is greater than the beginning inventory, the operating income under absorption costing is greater. 3. When production is less than sales, i.e. ending inventory is less than the beginning inventory, operating income under variable costing is greater.

How do you increase operating income?

By increasing sales and/or reducing costs, the operating income will increase. However, you must carefully scrutinize your operation and market before implementing these changes. In some industries, the ability to increase sales is limited.

How do you increase net operating income?

Operating costs are made up of payments for materials, to sub-suppliers, for labor and for overhead to manage these activities. If you can't increase sales, your revenue from operations can't go up. The only way to increase net operating income is to reduce operating costs.

What factor is the cause of the difference between operating income computed using absorption costing and operating income computed using variable costing?

The answer is b. Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories, and variable costing considers all…

When inventory increases absorption costing net operating income is higher?

When inventory increases, absorption costing net operating income is higher than variable costing net income but to the fix manufacturing overhead: Deferred in the inventory account on the balance sheet. When the number of units produced equals the number of units sold: no change in inventories occurs.

What is the cause of the difference in net operating income between absorption costing and variable costing?

Variable costing and absorption costing usually produce different net operating income figures. The reason is that the fixed manufacturing overhead cost is not treated the same way under two costing methods.

Which statement is true concerning the decision on whether to make or buy?

Cumulative Final Exam Review

Question	Answer
Which statement is true concerning the decision rule on whether to make or buy?	the company should buy if the cost of buying is less than the cost of producing.
Which decision will involve no incremental revenues?	make or buy decisions

How is operating income calculated?

Operating income = Total Revenue – Direct Costs – Indirect Costs. OR. 2. Operating income = Gross Profit – Operating Expenses – Depreciation – Amortization.

What affects operating profit margin?

The most obvious, easily identifiable and broad numbers that affect your profit margin are your net profits, your sales earnings, and your merchandise costs. On your income statement, look at net revenues and cost of goods sold for a very general view of these major variables.

What does it mean when operating income increases?

If your net operating income increases as a percentage of net sales, your business turns a higher profit margin on its revenues. This situation occurs when you lower expenses and generate the same revenue or when you increase expenses at a slower rate than a corresponding increase in sales.

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing? units produced are greater than units sold.

What is the cause of the difference in net operating income between absorption costing and variable costing quizlet?

What is the cause of the difference between absorption costing net operating income and variable costing net operating income? Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories; variable costing considers all fixed manufacturing costs to be period costs.

How does volume of production influence the make-or-buy decision?

Volume of Production: The quantity or volume of production affects the make or buy decision to the greater extent. If the volume of production is high, it favors the make decision and low volume favors buy decisions.

Which of the following factors must be taken into account before taking make-or-buy decision?

Make or buy decision is the production decision made by the company i.e whether to buy the product or to manufacture the product. The cost of buying and manufacturing are both taking into consideration while making the decision. Hence, the cost of production is considered for 'make or buy' decision.

Which accounts would affect operating income?

Which accounts would affect operating income? Answer: When inventory is purchased on account, assets (inventory), and liabilities (accounts payable) increase by equal amounts.

How can operating income be increased?

How to increase your profit margins?

Reduce cost of goods. Work with your suppliers to reduce the cost of goods sold. …
Improve inventory management. …
Boost staff productivity. …
Automate specific tasks in your business. …
Increase average order value. …
Retention, retention, retention. …
Identify and reduce waste.

Why would operating income decrease?

The two main reasons for a decline in operating profit are fairly easy to pinpoint – you either have a decrease in sales or an increase in expenses. Understanding the different reasons these occur can take more digging before you can stem the tide of profit erosion.

How does increase in sales affect operating income?

When the number of units in ending inventory increases through the year which of the following is true?

When the number of units in ending inventory increases through the year, which of the following is true? Net income is higher for absorption costing than for variable costing.