Managerial Accounting
3rd Edition
ISBN: 9780077826482
Author: Stacey M Whitecotton Associate Professor, Robert Libby, Fred Phillips Associate Professor
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 17ME
Compare full absorption costing to variable costing
Determine whether each the following statements describes variable costing (VC), full absorption costing (FA), or both (B):
1. Measures gross margin as the difference between sales revenue and cost of goods sold.
2. Used primarily for internal decision making.
3. Has the highest net income when production is greater than sales.
4. Shows the same profit for a given level of sales, regardless of production.
5. Has the highest cost of goods sold when sales are greater than production.
6. Accounts for a portion of fixed manufacturing
7. Required by GAAP for external reporting.
8. May lead managers to produce more units than the market demands.
9. When production and sales are equal, results in all of the current period manufacturing overhead being deducted on the income statement.
10. Measures contribution margin as the difference between sales revenue and variable costs.
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Students have asked these similar questions
What are these equations?
c.Under absorption costing, what is the cost of goods sold?
d.Under variable costing, what is the cost of goods sold?
e.Under absorption costing, what is the operating income?
f.Under variable costing, what is the operating income?
g.Reconcile the difference in operating income under absorption costing versus variable costing.
Choose the letter of the correct answer:
1.) This best accounts for the difference in profit between the absorption and variable costing *
a.) Difference in sales revenue
b.) Difference in fixed costs incurred
c.) Difference in inventory valuation
d.) Difference in variable costs incurred
2.) Variable selling expenses are *
a.) Product costs under variable costing but period costs under absorptions costing
b.) Period costs under variable costing but product cost under absorption costing
c.) Product costs under both costing methods
d.) period costs under both costing methods
3. Which of the following types of cost do not appear on a variable costing income statement? *
a.) Direct labor
b.) Direct materials
c.) Variable selling expenses
d.)Fixed factory overhead per unit per sold
4.) All of the following costs are included as product costs under absorption costing except *…
Which statement is TRUE?
An absorption costing income statement calculates gross profit; a variable costing income statement calculates contribution margin.
Both variable costing and absorption costing income statements calculate contribution margin.
A variable costing income statement calculates gross profit; an absorption costing income statement calculates contribution margin.
Both variable costing and absorption costing income statements calculate gross profit.
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Chapter 5 Solutions
Managerial Accounting
Ch. 5 - Define each of the following terms variable cost,...Ch. 5 - Prob. 2QCh. 5 - Prob. 3QCh. 5 - Prob. 4QCh. 5 - Prob. 5QCh. 5 - Describe the three methods used to estimate cost...Ch. 5 - Prob. 7QCh. 5 - Prob. 8QCh. 5 - Prob. 9QCh. 5 - Prob. 10Q
Ch. 5 - Prob. 11QCh. 5 - Prob. 12QCh. 5 - Prob. 13QCh. 5 - Prob. 14QCh. 5 - Which of the following increases when activity...Ch. 5 - Prob. 2MCCh. 5 - Prob. 3MCCh. 5 - Consider the following information for a local...Ch. 5 - Prob. 5MCCh. 5 - Prob. 6MCCh. 5 - Prob. 7MCCh. 5 - Prob. 8MCCh. 5 - Prob. 9MCCh. 5 - Hathaway Corp, manufactures garden hoses. Last...Ch. 5 - Identifying Cost Behavior Heather Oak is trying to...Ch. 5 - Prob. 2MECh. 5 - Defining Cost Behavior Match each of the following...Ch. 5 - Prob. 4MECh. 5 - Defining Terms for the High-Low Method Indicate...Ch. 5 - Prob. 6MECh. 5 - Prob. 7MECh. 5 - Prob. 8MECh. 5 - Prob. 9MECh. 5 - Prob. 10MECh. 5 - Prob. 11MECh. 5 - Prob. 12MECh. 5 - Prob. 13MECh. 5 - Prob. 14MECh. 5 - Prob. 15MECh. 5 - Prob. 16MECh. 5 - Compare full absorption costing to variable...Ch. 5 - Identifying Cost Behavior Patterns Steve...Ch. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Prob. 4ECh. 5 - Estimating Cost Behavior Using High-Low Method...Ch. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Estimating Cost Behavior Using Scattergraph and...Ch. 5 - Estimating Cost Behavior Using Least-Squares...Ch. 5 - Comparing High-Low Method and Least-Squares...Ch. 5 - Preparing Contribution Margin Income Statement...Ch. 5 - Determining Cost Behavior, Preparing Contribution...Ch. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Prob. 18ECh. 5 - Comparing Full Absorption Costing and Variable...Ch. 5 - Estimating Cost Behavior Using Least-Squares...Ch. 5 - Prob. 1.1GAPCh. 5 - Prob. 1.2GAPCh. 5 - Prob. 1.3GAPCh. 5 - Prob. 1.4GAPCh. 5 - Prob. 1.5GAPCh. 5 - Prob. 1.6GAPCh. 5 - Prob. 2.1GAPCh. 5 - Prob. 2.2GAPCh. 5 - Prob. 2.3GAPCh. 5 - Prob. 2.4GAPCh. 5 - Prob. 2.5GAPCh. 5 - Prob. 2.6GAPCh. 5 - Prob. 2.7GAPCh. 5 - Prob. 3.1GAPCh. 5 - Prob. 3.2GAPCh. 5 - Prob. 3.3GAPCh. 5 - Prob. 3.4GAPCh. 5 - Prob. 3.5GAPCh. 5 - Prob. 4.1GAPCh. 5 - Prob. 4.2GAPCh. 5 - Prob. 4.3GAPCh. 5 - Comparing Full Absorption and Variable Costing...Ch. 5 - Comparing Full Absorption and Variable Costing...Ch. 5 - Prob. 5.3GAPCh. 5 - Prob. 6.1GAPCh. 5 - Prob. 6.2GAPCh. 5 - Prob. 6.3GAPCh. 5 - Prob. 6.4GAPCh. 5 - Prob. 6.5GAPCh. 5 - Prob. 6.6GAPCh. 5 - Prob. 1.1GBPCh. 5 - Prob. 1.2GBPCh. 5 - Prob. 1.3GBPCh. 5 - Prob. 1.4GBPCh. 5 - Estimating Cost Behavior Using Scattergraph,...Ch. 5 - Prob. 1.6GBPCh. 5 - Prob. 2.1GBPCh. 5 - Estimating Cost Behavior Using Scattergraph,...Ch. 5 - Prob. 2.3GBPCh. 5 - Prob. 2.4GBPCh. 5 - Prob. 2.5GBPCh. 5 - Prob. 2.6GBPCh. 5 - Prob. 2.7GBPCh. 5 - Prob. 3.1GBPCh. 5 - Prob. 3.2GBPCh. 5 - Prob. 3.3GBPCh. 5 - Prob. 3.4GBPCh. 5 - Prob. 3.5GBPCh. 5 - Prob. 4.1GBPCh. 5 - Prob. 4.2GBPCh. 5 - Prob. 4.3GBPCh. 5 - Prob. 5.1GBPCh. 5 - Prob. 5.2GBPCh. 5 - Prob. 5.3GBPCh. 5 - Prob. 6.1GBPCh. 5 - Prob. 6.2GBPCh. 5 - Prob. 6.3GBPCh. 5 - Prob. 6.4GBPCh. 5 - Prob. 6.5GBPCh. 5 - Prob. 6.6GBP
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- The contribution margin is the a. amount by which sales exceed total fixed cost. b. difference between sales and total cost. c. difference between sales and operating income. d. difference between sales and total variable cost. e. difference between variable cost and fixed cost.arrow_forwardProduct costs under variable costing are typically: A. higher than under absorption costing B. lower than under absorption costing C. the same as with absorption costing D. higher than absorption costing when inventory increasesarrow_forwardThe amount of a units sales price that helps to cover fixed expenses is its ____________________. A. contribution margin B. profit C. variable cost D. stepped costarrow_forward
- Gross margin is to absorption costing as which of the following is too variable costing? A. Gross Profit B. Contribution Margin C. Net Income D. Product Marginarrow_forwardIn a cost-volume-profit (CVP) graph, the intersection of the total sales line and the total expense line represents which of the following? Multiple Choice The break-even point The total fixed expenses The total variable expenses The total contribution marginarrow_forwardVariable costing income will be greater than absorption costing income when: a. Sales is greater than production. b. contribution pricing is applied c. Production is less than or equal to sales. d. Production is greater than salesarrow_forward
- 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 AnswersNextarrow_forwardExplain clearlyarrow_forwardWhen using the total cost concept of applying the cost-plus approach to product pricing, what is included in the markup? Total costs plus desired profit Desired profit Total selling and administrative expenses plus desired profit Total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profitarrow_forward
- Which of the following statements is true when making decisions using cost-volume-profit (CVP) analysis? Select one: a. As long as the contribution margin is a positive number, net income will be positive b. As long as variable costs are more than fixed costs, net income will be negative c. As long as the contribution margin is greater than fixed costs, net income will be positive d. As long as the sales price per unit is greater than fixed costs per unit, net income will be positivearrow_forwardWhen using the product cost method of applying the cost-plus approach to product pricing, which of the following is included in the markup? Oa. total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit b. desired profit Oc. total costs plus desired profit Od. total selling and administrative expenses plus desired profitarrow_forwardIf an income statement is prepared as an internal report, under which of the following methods would the term gross margin most likely appear? Question 10 options: a) Both absorption costing and variable costing. b) Absorption costing but not variable costing. c) Variable costing but not absorption costing. d) Neither variable costing nor absorption costingarrow_forward
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