What is the basic difference between variable costing and absorption costing? a. Variable costing always produces less taxable income that absorption costing. b. Variable costing recognizes fixed costs as a period cost and absorption costing recognizes fixed costs as a product cost. c. Variable costing cannot use standards, whereas standards may be used with absorption costing. d. Variable costing may be used only in situations where production is essentially homogenous, but absorption costing may be used under any manufacturing condition.

What is the basic difference between variable costing and absorption costing? a. Variable costing always produces less taxable income that absorption costing. b. Variable costing recognizes fixed costs as a period cost and absorption costing recognizes fixed costs as a product cost. c. Variable costing cannot use standards, whereas standards may be used with absorption costing. d. Variable costing may be used only in situations where production is essentially homogenous, but absorption costing may be used under any manufacturing condition.

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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Similar questions

Please explain why the option is correct and why the other options are incorrect
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.
Marginal costing is also known as: O a. Direct costing and Variable costing O b. Direct costing c. Variable costing d. None of the mentioned
Which of the following statements are false? SELECT ALL THAT APPLY a. One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is. b. A new fixed cost that must be paid if a special offer is accepted is not relevant in making the decision. c. A cost that will be incurred regardless of which course of action a manager takes is relevant to the manager's decision. d. Your Company is considering replacing Machine X. The original cost of Machine X is not relevant to this decision.
Explain how absorption costing can enable a manager to increase production solely for the purpose of inflating profit but prevents a manager from doing this if variable costing is used.
2*
Which of the following is true? • Depreciation cost is always product cost • Depreciation cost is always period cost • Selling expense if always part of period cost, regardless of product costing system • Income under absorption is always greater than variable costing because of deferment of FOH
Which of the following statements about activity-based costing (ABC) is false? Group of answer choices In activity-based costing, cost drivers are what cause costs to be incurred. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. Activity-based costing is useful for allocating marketing and distribution costs. Activity-based costing differs from traditional costing systems in that it allocates costs according to the rates at which a product consumes different activities.
Under which costing system non manufacturing costs will not be included in calculating product costs? a. Absorption costing and Variable costing systems. b. Variable costing system only. C. Absorption costing system only. d. Activity based costing system only. e. None of the given answers
Briefly explain the potential negative consequences in pricing decisions from using a traditional, volumebased product-costing system.