FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Operating profit is affected by changes in production under both the variable costing and
absorption costing approaches
TRUE
FALSE
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- Relevant of differential cost analysis takes all variable and fixed costs into account to analyze decision alternatives considers only variable costs as they change with each decision alternative considers the change in reported net income for each alternative to arrive at the optimum decision for the company considers all variable and fixed costs as they change with each decision alternatives The term that refers to costs incurred in the past that are not relevant to a future decision is full absorption cost sunk cost incurred marginal cost under allocated indirect costarrow_forwardWhen using the high-low method to estimate costs, the formula “Change in Cost divided by Change in Units” (or “Change in Total Cost divided by Change in Activity Level”) is used to estimate the: Fixed cost per unit Mixed cost per unit Profit per unit Indirect cost per unit Variable cost per unit Differential cost per unit Opportunity cost per unitarrow_forwardVariable costing can also be referred to as: Select one: a. Internal costing b. Cost-plus costing c. Absorption costing d. Marginal costingarrow_forward
- Which of the following line items will not be found in the absorption costing income statement? Group of answer choices Variable manufacturing and non-manufacturing costs Contribution margin Gross profit Fixed manufacturing costsarrow_forwardCurrent Attempt in Progress The following information is available for Marin Company. Raw materials inventory Work in process inventory Finished goods inventory Materials purchased Direct labor Manufacturing overhead Sales revenue (a) January 1, 2022 $17,600 eTextbook and Media 11,400 22,700 2022 $126,000 184,800 151,200 764,400 December 31, 2022 $25,200 14,500 17,640 Compute cost of goods manufactured. (Assume that all raw materials used were direct materials.) MARIN COMPANY Cost of Goods Manufactured Schedule QUO Attempte:0 of 3 used Submit Answerarrow_forwardWhat is the difference in variable costing and absorption costing on the income statement? Which method is useful for manager's in making pricing and costing decisions?arrow_forward
- Which of the following statements regarding marginal costing is incorrect? Select one: O A. It is useful long-term planning technique OB. It assumes that fixed costs remain fixed over relevant activity ranges O C. It assumes that variable costs vary in proportion to activity O D. It assumes that costs can be classified as variable or fixedarrow_forwardWhy functional (or volume)- based costing approaches may produce distorted costs.arrow_forward1. Explain why the variances used to reconcile profit in a standard costing system are different from those used in a standard absorption costing system. 2. Explain the arguments for the use of traditional absorption costing rather than marginal costing for profit reporting and inventory valuation.arrow_forward
- 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.arrow_forwardA 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.arrow_forwardWhen units produced equal units sold, how does operating income differ between variable costing and absorption costing?arrow_forward
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