24. If a firm uses variable costing, a. its product costs include variable selling and administrative costs. b. its profits with sales. c.it calculates an idle facility variation. d. its product cost per unit changes because of changes in the number of units produced. 25. The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both variable and fixed, as inventoriable costs is called a. variable costing b. Absorption costing c. conversion costing d. perpetual inventory 26. Which of the following statements regarding absorption and variable costing is correct? a. Absorption costing results in higher income when finished goods inventory increases. b. Variable manufacturing costs are lower under absorption costing. c. Overhead costs are treated in the same manner under both variable and absorption costing methods. d. Profits are always the same under the two costing methods. 27. Which of the following cost items is not correctly accounted for as a product cost under absorption and variable costing? PRODUCT COST UNDER ABSORPTION. VARIABLE a. Shipping costs No No b. Straight-line depreciation Yes Yes c. Factory supplies Yes Yes d. Direct Materials Yes Yes

24. If a firm uses variable costing, a. its product costs include variable selling and administrative costs. b. its profits with sales. c.it calculates an idle facility variation. d. its product cost per unit changes because of changes in the number of units produced. 25. The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both variable and fixed, as inventoriable costs is called a. variable costing b. Absorption costing c. conversion costing d. perpetual inventory 26. Which of the following statements regarding absorption and variable costing is correct? a. Absorption costing results in higher income when finished goods inventory increases. b. Variable manufacturing costs are lower under absorption costing. c. Overhead costs are treated in the same manner under both variable and absorption costing methods. d. Profits are always the same under the two costing methods. 27. Which of the following cost items is not correctly accounted for as a product cost under absorption and variable costing? PRODUCT COST UNDER ABSORPTION. VARIABLE a. Shipping costs No No b. Straight-line depreciation Yes Yes c. Factory supplies Yes Yes d. Direct Materials Yes Yes

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Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

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Concept explainers

Process Costing

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure. 

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.

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Question

24. If a firm uses variable costing,
a. its product costs include variable selling and administrative costs.
b. its profits with sales.
c.it calculates an idle facility variation.
d. its product cost per unit changes because of changes in the number of units produced.
25. The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both
variable and fixed, as inventoriable costs is called
a. variable costing
b. Absorption costing
c. conversion costing
d. perpetual inventory
26. Which of the following statements regarding absorption and variable costing is correct?
a. Absorption costing results in higher income when finished goods inventory increases.
b. Variable manufacturing costs are lower under absorption costing.
c. Overhead costs are treated in the same manner under both
variable and absorption costing methods.
d. Profits are always the same under the two costing methods.
27. Which of the following cost items is not correctly accounted for as a product cost under absorption and
variable costing?
PRODUCT COST UNDER
ABSORPTION. VARIABLE
a. Shipping costs No No
b. Straight-line depreciation Yes Yes
c. Factory supplies Yes Yes
d. Direct Materials Yes Yes

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Product costs under variable costing are typically: A. higher than under absorption costing B. lower than under absorption costing C. the same as with absorption costing D. higher than absorption costing when inventory increases
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1. Variable costing enables more efficient: Cost-volume-profit (CVP) analysis. O External reporting. Financial statement analysis. Physical inventory counts.
Selling and administrative expenses are considered to be: a. A period cost under variable costing b. A product cost under variable costing c. Part of fixed manufacturing overhead under variable costing O d. A product cost under absorption costing.
Sunland Products manufactures and sells a variety of camping products. Recently the company opened a new factory to manufacture a deluxe portable cooking unit. Cost and sales data for the first month of operation are shown below: Beginning inventory Units produced Units sold Manufacturing costs Fixed overhead Variable overhead Direct labour Direct material Selling and administrative costs Fixed Variable 0 units 11,200 10,100 $100,800 $3 $12 $28 $207,100 per unit. per unit per unit $3 per unit sold The portable cooking unit sells for $110. Management is interested in the opening month's results and has asked for an income statement.
Under variable costing: a. Net operating income will always be higher than under absorption costing. b. Net operating income will tend to move up and down in response to changes in levels of production. O c.Inventory costs will be lower than under absorption costing. d. Net operating income will tend to vary inversely with production changes
Which of the following statement is correct? A In a variable costing income statement, sales revenue is typically higher than in absorption costing income statement. B When production is not equal to sales, income under absorption costing differs from income under variable costing due to the difference in treatment ( product cost and period cost) of the fixed overhead cost under the two costing methods. C In variable costing system, fixed overhead cost is included as part of the cost of inventory. D In an absorption costing system, fixed overhead cost is treated as a period cost.
Under variable costing, all fixed manufacturing costs are treated as a a. product cost included in the cost of goods manufactured. b. product cost included in the cost of ending inventory. c. period expense deducted from manufacturing margin. d. period expense deducted from contribution margin.
First: When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. Second: Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when sales volume exceeds production volume. * a. Both statements are true b. Only the first statement is true c. Only the second statement is true d. Both statements are false
Product costs under variable costing are typically: Group of answer choices A. higher than under absorption costing B. lower than under absorption costing C. the same as with absorption costing D. higher than absorption costing when inventory increases
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