24. If a firm uses variable costing, a. its product costs include variable selling and administrative costs. b. its profits with sales. c.it calculates an idle facility variation. d. its product cost per unit changes because of changes in the number of units produced. 25. The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both variable and fixed, as inventoriable costs is called a. variable costing b. Absorption costing c. conversion costing d. perpetual inventory 26. Which of the following statements regarding absorption and variable costing is correct? a. Absorption costing results in higher income when finished goods 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 the two costing methods. 27. Which of the following cost items is not correctly accounted for as a product cost under absorption and variable costing? PRODUCT COST UNDER ABSORPTION. VARIABLE a. Shipping costs No No b. Straight-line depreciation Yes Yes c. Factory supplies Yes Yes d. Direct Materials Yes Yes

24. If a firm uses variable costing, a. its product costs include variable selling and administrative costs. b. its profits with sales. c.it calculates an idle facility variation. d. its product cost per unit changes because of changes in the number of units produced. 25. The inventory costing method that treats direct manufacturing costs and indirect manufacturing costs, both variable and fixed, as inventoriable costs is called a. variable costing b. Absorption costing c. conversion costing d. perpetual inventory 26. Which of the following statements regarding absorption and variable costing is correct? a. Absorption costing results in higher income when finished goods 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 the two costing methods. 27. Which of the following cost items is not correctly accounted for as a product cost under absorption and variable costing? PRODUCT COST UNDER ABSORPTION. VARIABLE a. Shipping costs No No b. Straight-line depreciation Yes Yes c. Factory supplies Yes Yes d. Direct Materials Yes Yes

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Description: 24. If a firm uses variable costing,a. its product costs include variable selling and administrative costs.b. its profits with sales.c.it calculates an idle facility variation.d. its product cost per unit changes because of changes in the number of

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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The costs assigned to units in inventory are typically lower under absorption costing thanunder vanable costinaTRUEFALSE Operating profits move in the same direction as sales when variable costing is used ifselling prices, the sales mix and the cost structure remain the sameTRUEFALSE Absorption costing is more compatible with cost-volume-profit analysis than is variablecosting.TRUEFALSE Variable manufacturing overhead costs are treated as period costs under bothabsorption and variable costingTRUEFALSE Operating profit is affected by changes in production under both the variable costing andabsorption costing approachesTRUEFALSE In a manufacturing company using absorption costing, the fixed costs associated withidle production capacity are commonly included as part of the product cost.TRUEFALSE In activity-based costing, some manufacturing costs may be excluded from product costsTRUEFALSE The margin of safety can be defined as the amount by which sales can decrease beforelosses are…
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.
Variable costing is concerned with the variable costs and includes direct material, direct labor, and variable manufacturing overhead. The fixed manufacturing overhead is treated as a cost of the period under variable costing. Absorption costing uses the costs in variable costing and the per-unit cost of fixed manufacturing overhead. When inventory increases, the ending inventory includes a portion of the fixed manufacturing overhead in absorption costing. True / False
Kindly answer all questions: 1.) Cost behavior is considered linear whenever a straight line is a reasonable approximation for the relation between cost and activity. A. True B. False 2.) Which of the following is an example of a cost that is variable with respect to the number of units produced? A. rent on administrative office building B. rent on factory building C. Salaries of top marketing executives D. direct labor cost, where the direct labor force is adjusted to actual production of the period 3.) Fixed costs are constant in total amount over the relevant range of operations. A. True B. False 4.) The cost function derived by the simple least squares method: A. must be tested for minimum and maximum points. B. is parabolic. C. is linear. D. is curvilinear.
7. Under variable costing, which of the following costs are assigned to inventory? Variable Selling & Administrative Costs Variable Factory Overhead Costs (A) Yes No (B) No Yes (C) Yes Yes (D) No No 8. Which of the following would appear on both the budgeted income statement and on the schedule of expected cash disbursements for operating expenses? (A) Depreciation expense (B) Rent expense (C) Sales commission expense (D) Both B and C 9. Which of the following is not an underlying assumption of the cost-volume-profit graph? (A) Expenses are categorized into fixed and variable (B) Revenues and expenses are linear over the relevant range (C) Efficiency and productivity will be unchanged (D) Sales mix will not be constant
Income under absorption costing will be higher than the income under variable costing when the costs of Group of answer choices Beginning inventory exceeds the ending inventory Units manufactured are less than the units sold during the period Units manufactured exceeds the units sold during the period Units manufactured are equal to the units sold during the period
Chapter 3- CVP Cost-volume-profit (CVP) analysis requires an understanding of cost behavior: variable and fixed costs. Cost behavior differs from the GAAP-based financial reporting focus: product and period costs. The two ways to categorize costs results in TWo different income statements: Absorption costing income statement: S-C-GM-SA-NI (Key assumption: Split costs into product and period costs) Variable costing income statement: S-VE-CM-FE-NI (Key assumption: Split costs into variable and fixed) 1. 2. Absorption Costing Income Statement Variable Costing Income Statement Sales $500,000 Sales $500,000 Less: Variable expenses Less: Cost of goods sold: Variable (DM+DL+VOH) Fixed (FOH) Gross margin 100,000 Product costs 100,000 60,000 S&A costs 110,000 340,000 Contribution margin 290,000 Less: Fixed expenses Less: Selling & administrative Variable 110,000 Product costs 60,000 Fixed 140,000 S&A costs 140,000 Taxable income $90,000 Taxable income $90,000 LINK THE LINEAR COST FUNCTION TO…
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
Baxtell Company manufactures and sells a single product. The following costs were incurred during the company's first year of operations: Variable costs per unit: Manufacturing: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $ 27 7 4 9 370,800 183,200 During the year, the company produced 30,900 units and sold 22,900 units. The selling price of the company's product is $73 per unit. Required: 1. Assume that the company uses absorption costing. a. Compute the unit product cost. Unit product cost b. Prepare an income statement for the year. (Do not leave any empty spaces; Input a O wherever it is required.) Absorption Costing Income Statement Cost of goods sold:
When production exceeds sales,a. Ending inventory under variable costing will exceed ending inventory under absorption costingb. Ending inventory under absorption costing will exceed ending inventory under variable costing.c. Ending inventory under absorption costing will be equal to ending inventory under variable costing.d. Ending inventory under absorption costing either exceeds, be equal to, or be less 20 than ending inventory under variable costing.
True or false Give answer of all with explanation.
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