Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

Question

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Answer 1

Textbook Question

Chapter 9, Problem 9.1Q

Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

Expert Solution & Answer

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.

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02:01

Students have asked these similar questions

Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

Do you agree from the following statements- Explain in details with examples 1.Variable costs are controllable but fixed costs are not. 1.Sunk costs are irrelevant cost while making any decision.

Which of the following is not a true statement about variable costs? a. Total cost is known to change in proportion to any changes in related level of volume or activity. O b. When considering total cost behaviour, focus on fixed and variable costs. O c. A total cost that can change in proportion to changes in the number of products produced. O d. Total cost never changes in proportion to any changes in related levels of volume or activity. O e. An important cost to identify so managers can make important management decisions.

Answer 2

Textbook Question

Chapter 9, Problem 9.1Q

Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

Expert Solution & Answer

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

02:01

Answer 3

Textbook Question

Chapter 9, Problem 9.1Q

Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

Expert Solution & Answer

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

02:01

Answer 4

Textbook Question

Chapter 9, Problem 9.1Q

Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

Expert Solution & Answer

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

02:01

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.

Answer 8

Expert Solution & Answer

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

Variable Costing:

The variable costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads to the period of production and not to the inventory left unsold or ending inventory.

Absorption Costing:

The absorption costing is a method used to allocate the fixed manufacturing overhead by a company. It allocates these overheads based on the inventory produced and inventory sold. It is based on the approach that the unsold inventory also consist some fixed manufacturing overhead incurred during a period.

To explain: The basis of differences in operating income between variable costing and absorption costing.

Answer 12

Answer to Problem 9.1Q

The difference is due to the accounting of fixed manufacturing costs and the valuation of inventory during a production period.

Answer 13

Explanation of Solution

The fixed manufacturing overhead is allocated to total unit produced during a period under the absorption costing.
The fixed manufacturing overhead is allocated to total unit sold during a period under the variable costing.
It affects the total cost of goods sold and the inventory valuation.

Answer 14

Conclusion

So, the statement that fixed costs are the reason for difference in operating income is not complete as it is also affected by the inventory valuation.