When the number of units sold exceed the number of units produced, income reported under absorption costing will be lower than variable costing. Which of the following gives the best justification of the above statement? a. Income under absorption costing is always more than income reported using variable costing, regardless of the number of units produced. b. The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory. c. The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory. d. Income under absorption costing is always less than income reported using variable costing, regardless of the number of units produced. e. Fixed overhead is treated as a period cost under absorption costing.
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.
When the number of units sold exceed the number of units produced, income reported under absorption costing will be lower than variable costing. Which of the following gives the best justification of the above statement?
| a. |
Income under absorption costing is always more than income reported using variable costing, regardless of the number of units produced. |
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| b. |
The fixed |
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| c. |
The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory. |
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| d. |
Income under absorption costing is always less than income reported using variable costing, regardless of the number of units produced. |
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| e. |
Fixed overhead is treated as a period cost under absorption costing. |
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