Exeter Ltd. introduced a new mass-produced specialty product early in the year. Production and sales of this product for the first four months are as follows: The firm's budgeted fixed overhead is $200,000, and budgeted output is 1,000 units per month. The volume variance, if any, is carried forward month-by-month and closed at the end of the year. When 1,000 units are produced and sold, expected monthly operating profit is $40,000.
Compared to using absorption costing, using variable costing will result in operating profit for the 4-month period to be
A) Higher
B) Lower
C) Same
D) Cannot be determined

Question

Quizplus · Accepted Answer

The Answer of Exeter Ltd. introduced a new mass-produced specialty product early in the year. Production and sales of this product for the first four months are as follows: The firm's budgeted fixed overhead is $200,000, and budgeted output is 1,000 units per month. The volume variance, if any, is carried forward month-by-month and closed at the end of the year. When 1,000 units are produced and sold, expected monthly operating profit is $40,000.
Compared to using absorption costing, using variable costing will result in operating profit for the 4-month period to be
A) Higher
B) Lower
C) Same
D) Cannot be determined