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The change in period-to-period operating income when using variable costing can be explained by the change in the
Suggested Answer: D
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The estimated incremental after-tax operating cash flows for each year of a capital project consist of two components: the after-tax cash inflows from operations and the depreciation tax shield arising from the purchase of new equipment. The first of these for Pauley can be calculated as follows:
Pauley's total after-tax operating cash inflow for each year of the project's life is thus $36,000 ($30,000 + $6,000). Ii the final year of the project, two additional cash flows must be taken into account, the after-tax proceeds from the disposal of the equipment purchased for the project, and the recovery of working capital devoted to the project. These two additional cash flows can be calculated as follows:
Pauley's total after-tax cash inflow for the final year of the project's life is thus $49,000
($36,000 + $13,000).
41 comments · newest first
WE
Weldon
11 months ago
No way, D is the correct answer! Inventory impacts income too!
WH
Whitney
11 months ago
Surprised it's not about inventory levels at all!
HE
Helene
11 months ago
Wait, isn't it A? Sales price matters too, right?
BL
Blair
11 months ago
I agree, C makes the most sense here!
OR
Ora
11 months ago
It's definitely C, unit sales level times contribution margin.
DA
Dalene
12 months ago
I feel like option C makes the most sense since it ties directly to how variable costing works with contribution margins.
AL
Alayna
12 months ago
I’m a bit confused about the finished goods inventory part. Does it really affect the operating income in variable costing?
KA
Kate
12 months ago
I remember practicing a similar question, and I believe it had to do with the unit sales level multiplied by the contribution margin.
DO
Dorsey
1 year ago
I think the change in operating income relates to unit sales, but I'm not sure if it's the contribution margin or just the sales price.
TA
Tatum
1 year ago
Wait, I thought it was the change in the finished goods inventory level that impacted operating income under variable costing. I'm a bit confused now - I'll have to think this through carefully.
DU
Dustin
1 year ago
Okay, I've got this. The change in period-to-period operating income under variable costing is driven by the change in the unit sales level multiplied by the constant unit contribution margin. The inventory level doesn't factor in directly.
NI
Nikita
1 year ago
Hmm, I'm a bit unsure about this one. I know variable costing is different from absorption costing, but I'm not totally clear on the specific relationship between changes in sales/inventory and operating income. I'll need to review my notes on this.
VI
Viva
1 year ago
This looks like a straightforward question on variable costing. I think the key is to focus on how changes in unit sales and inventory levels impact operating income under variable costing.
LA
Layla
1 year ago
Hmm, I'm a bit unsure about the differences between synchronous and asynchronous calls. I'll need to think this through carefully to make sure I don't mix up the details.
MA
Markus
1 year ago
Hmm, I'm a bit confused by the different protocol options here. I'll need to review my notes on load balancing and TLS to make sure I understand the correct answer.
CA
Catarina
1 year ago
I think I know this one - it's probably something like 'mailq' or 'sendmail -bp', but I'll need to double-check the exact command.
SU
Sue
1 year ago
I'm torn between C and D, but I think I'll go with C. Inventory changes shouldn't affect the operating income under variable costing, right?
CE
Celestina
1 year ago
Glory: Let's go with C then.
ZO
Zona
1 year ago
User 3: I'm not sure, but I think C makes sense.
GL
Glory
1 year ago
User 2: I agree, inventory changes shouldn't affect operating income under variable costing.
MA
Mari
1 year ago
User 1: I think the answer is C. Unit sales level multiplied by a constant unit contribution margin.
HA
Hassie
1 year ago
C is the way to go. The unit sales level and the unit contribution margin are the key factors here, not the inventory level.
AN
Anika
1 year ago
I think C is the best choice too. The unit sales level and unit contribution margin are directly related to operating income.
ME
Merri
1 year ago
Yes, C makes sense. It's all about how many units are sold and the contribution margin per unit.
FE
Felicitas
1 year ago
I agree, C is the correct answer. The unit sales level and unit contribution margin are what drive the change in operating income.
DE
Devorah
1 year ago
Haha, this question is a real head-scratcher. Is the answer a variable or a constant? I can't keep up with all these accounting terms!
LU
Luisa
1 year ago
I know, accounting terms can be confusing sometimes!
GA
Gabriele
1 year ago
C) Unit sales level multiplied by a constant unit contribution margin.
DE
Detra
1 year ago
A) Unit sales level multiplied by the unit sales price.
CA
Casie
1 year ago
I'm going with D. The change in operating income is affected by the change in finished goods inventory level and the unit contribution margin.
RI
Ria
1 year ago
Option C looks good to me. The change in period-to-period operating income under variable costing is directly related to the change in unit sales level, not inventory level.
FR
Francisca
1 year ago
Exactly. It's all about the unit sales level and the constant unit contribution margin.
NO
Norah
1 year ago
So, the change in period-to-period operating income is not affected by the inventory level?
GI
Gilma
1 year ago
That makes sense. The change in operating income is based on unit sales level.
DO
Domingo
1 year ago
I agree, option C is correct. The unit contribution margin remains constant.
ME
Merlyn
1 year ago
But if you think about it, using a constant unit contribution margin makes more sense in variable costing.
MA
Mariann
1 year ago
I disagree, I believe the answer is D.
ME
Merlyn
1 year ago
I think the answer is C.
CO
Colette
1 year ago
But if you think about it, using a constant unit contribution margin makes more sense in variable costing.
EL
Eleni
2 years ago
I disagree, I believe the answer is D.
CO
Colette
2 years ago
I think the answer is C.