1) When performing regression analysis, which term is associated with the the varirable cost per activity?

A. Regression

B. Intercept

C. R-square

D. X Variable 1

2) The differences between a contribution income statement versus the traditional approach (absorption which is GAAP). There is no difference in operating income between the two:

If it is a merchandising company since all cost of goods sold are variable.

Manufacturing company when the units produced are the same as the units sold.

However, the operating income will be different for a manufacturing company when the units produced do NOT equal the units sold.

If a manufacturing company builds a lot of inventory and does not sale it, the fixed manufacturing overhead will be expensed under the contribution margin approach and under the traditional approach the fixed manufacturing overhead will not be expensed as cost of goods sold and it will remain in the inventory on the balance sheet.

Therefore, based on the previous paragraph, when inventory levels increase, under which approach will show a higher operating income?

A. Traditional (absoprtion) (GAAP)

B. Contribution margin