Net Income reported under variable costing will exceed net income reported under full costing during a given period when: a. The number of units sold exceeds the number of units produced during the same period. b. The number of units sold is equal to the number of units produced during the same period. c. The number of units produced exceeds the number of units sold. d. Absorption costing will always produce the higher income because only the fixed costs associated with the units sold will be included in the cost of goods sold.

Net Income reported under variable costing will exceed net income reported under full costing during a given period when: a. The number of units sold exceeds the number of units produced during the same period. b. The number of units sold is equal to the number of units produced during the same period. c. The number of units produced exceeds the number of units sold. d. Absorption costing will always produce the higher income because only the fixed costs associated with the units sold will be included in the cost of goods sold.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 14MC: Which of the following statements is true regarding average fixed costs? A. Average fixed costs per...

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UNDER VARIABLE COSTING, PRODUCING MORE UNITS THAN THE NUMBER OF UNITS SOLD IN A PERIOD WILL: A. CAUSE NET OPERATING INCOME FOR THE PERIOD TO DECREASE. B. CAUSE NET OPERATING INCOME FOR THE PERIOD TO INCREASE. C. HAVE NO EFFECT ON NET OPERATING INCOME FOR THE PERIOD.
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When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will: Multiple Choice fluctuate in direct proportion to changes in production. remain constant. fluctuate inversely with changes in production. be greater than net operating income under absorption costing.
Under variable costing: a. net operating income will tend to move up and down in response to changes in levels of production. b. inventory costs will be lower than under absorption costing. c. net operating income will tend to vary inversely with production changes. d. net operating income will always be higher than under absorption costing.
Net operating income computed under variable costing would exceed net operating income computed using absorption costing if: Multiple Choice units sold exceed units produced. units sold are less than units produced. units sold equal units produced. the average fixed cost per unit is zero.
Which of the following statements is true? a. When production is greater than sales, operating income will be equal under variable costing and absorption costing b. When production is greater than sales, operating income will be lower under absorption costing than variable costing. c. When production is equal to sales, operating income will be greater under variable costing than absorption costing. d. When production is less than sales, operating income will be lower under absorption costing than variable costing.
If the units produced exceed unit sales, which method would you expect to show the higher netoperating income, variable costing or absorption costing? Why?
When units produced are less than units sold, income under absorption costing is higher than income under variable costing. True or False True False