ECONOMICS

Detailed explanation-1: -Subtract the ending inventory dollar value, and the result is cost of goods sold. Subtract gross sales from cost of goods sold to calculate the gross margin. Subtract selling expenses to find net operating income for the period.

Detailed explanation-2: -Answer and Explanation: The correct statement about absorption and variable costing methods is option C. If the units produced are above the units sold, the company will have ending inventory units at the end.

Detailed explanation-3: -All direct and indirect costs, such as direct materials, direct labor, rent, and insurance, are accounted for when using this method. Under generally accepted accounting principles (GAAP), U.S. companies may use absorption costing for external reporting, however variable costing is disallowed.

Detailed explanation-4: -When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.