6If inventory increased during the year, income reported under absorption costing:will be higher than that reported under variable costing.will be the same as that reported under variable costing.will be lower than that reported under variable costing.will differ from that reported under variable costing, the direction of which cannot be determined from theinformation given.

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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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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
Baxtell Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $ 27 7 4 9 370,800 183,200 During the year, the company produced 30,900 units and sold 22,900 units. The selling price of the company's product is $73 per unit. Required: 1. Assume that the company uses absorption costing. a. Compute the unit product cost. Unit product cost b. Prepare an income statement for the year. (Do not leave any empty spaces; Input a O wherever it is required.) Absorption Costing Income Statement Cost of goods sold:
21. Which of the following statements 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 a 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
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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.
Bulldogs Inc. wants to determine the impact of the change in selling price of its sole product in relation to the analysis of its gross profit. Which of the following must the company determine? a. Sales Volume Variance b. Cost Price Variance c. Volume Variance d. Sales Price Variance
The inventory cost computed under absorption costing is ____ the inventory cost computed using variable costing. Group of answer choices half of thrice as much equal to greater than
Variable costing has an advantage over absorption costing for which of the following purposes? all of the choices mentioned analysis of profitability of products, territories, and other segments of a business determining the CVP relationship among the major factors of selling price, sales mix, and sales volume minimizing the effects of inventory changes on net income
Over extended periods of time, the net income figures reported under absorption costing will be: a. Equal to net income reported under variable costing b. Higher or lower because no generalization can be made c. Less than net income reported under variable costing d. Greater than net income reported under variable costing
The cost of the ending inventory under absorption costing is higher than the cost of ending inventory under varibale costing by 1. an amount equal to the fixed overhead cost per unit. 2. an amount computed by multiplying the units in the ending inventory by the fixed costs per unit. 3. an amount equal to the difference in the income amounts under both costing methods. 4. the amount equal to the fixed overhead cost charged to expense during the period.
How is operating income affected if the number of units sold exceeds the number of units produced? Select one: a. Operating income would be higher under a variable costing income statement. b. Operating income would be lower under a variable costing income statement. c. Operating income would be higher under an absorption costing income statement. d. Operating income would be the same under both a variable costing and absorption costing income PreviousSave AnswersNext

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If inventory increased during the year, income reported under absorption costing: will be higher than that reported under variable costing.