Which of the following statements regarding absorption and variable costing is correct? A Absorption costing results in higher income when 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 two costing methods.

Which of the following statements regarding absorption and variable costing is correct? A Absorption costing results in higher income when 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 two costing methods.

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
Which of the following is a correct statement? O A. the fixed manufacturing cost is based on a per unit cost, when using Variable Costing O B. the fixed manufacturing cost is based on a per unit cost, when using Absorption Costing and a total cost, when using Variable Costing Oc the variable manufacturing cost is shown as a total cost in both Variable Costing and Absorption Costing O D. the fixed manufacturing cost is always shown as a total cost, when using Absorption Costing
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
The _________ is considered part of the cost of the product in absorption costing, but not in variable costing. Group of answer choices Variable Overhead Fixed Overhead Variable Selling & Administrative Fixed Selling and Administrative In the absorption income statement, Sales less Cost of Goods Sold is the calculation for: Group of answer choices Contribution margin Gross margin Net Income Operating Income
What is the difference between variable costing and absorption costing income statements? a. Provide a hypothetical income statement in both formats in which the number of units sold is different from the number of units manufactured. b. Explain the contrast between the two formats.
Which of the following statements is FALSE? a. There is a cause-and-effect relationship between the cost driver and the amount of cost. b. Over the long run all costs have cost drivers. c. Volume of production is a cost driver of direct manufacturing costs. d. Fixed costs have cost drivers over the short run.
A cost that would be included in product costs under both absorption costing and variable costing is: supervisory salaries. variable selling expenses. factory rent. variable manufacturing costs.
Question One Describe the following costing systems: Marginal and Absorption costing Explains the effect on profit of using variable (marginal) and absorption costing. Explain TWO advantages and TWO disadvantages of both marginal and absorption costing systems.
Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.
Which of the following statements correctly complete the sentence:"Gross Margin equals":I. sales revenue less (minus) cost of goods sold.II. contribution margin less (minus) fixed costs.III. operating income plus all period costs.IV. sales revenue less (minus) cost of goods manufactured.
What is the key difference between Absorption Costing and Marginal Costing? A Absorption Costing treats Manufacturing Overhead as a period cost. B Marginal Costing treats Fixed Manufacturing Overhead as a period cost. C Absorption Costing only considers variable costs to calculate net income. D Marginal Costing only considers variable costs to calculate net income.
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