Kertas, Inc. produces paper and office supplies and uses the just-in-time inventory system. Currently, the company is using variable costing. Which of the following is true of the effect of costing systems on the financial results of Kertas? A.Its operating income will vary a little if the company uses absorption costing instead of variable costing. B.Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. C.Its operating income will be negative if the company uses absorption costing instead of variable costing. D.Its operating income will be significantly lower if the company uses absorption costing instead of variable costing.

Just in time inventory system is the system where the Purchase is done only when it is required , so…

Answered: Kertas, Inc. produces paper and office…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Kertas, Inc. produces paper and office supplies and uses the just-in-time inventory system. Currently, the company is using variable costing. Which of the following is true of the effect of costing systems on the financial results of Kertas?

Its operating income will vary a little if the company uses absorption costing instead of variable costing.

Its operating income will be significantly higher if the company uses absorption costing instead of variable costing.

Its operating income will be negative if the company uses absorption costing instead of variable costing.

Its operating income will be significantly lower if the company uses absorption costing instead of variable costing.

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