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_forwardIn the variable costing income statement, how are the fixed manufacturing costs reported, and how are the fixed selling and administrative expenses reported?arrow_forward
- The 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_forwardIn the variable costing income statement, how are the fixed manufacturing costs reported, and how are the fixed selling and administrative expenses reported?arrow_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
- When units sold exceeds, units produced, basisa. net income under absorption costing is higher than net income under variable costing.b. net income under absorption costing is lower than net income under variable costing.c. net income under absorption costing equals net income under variable costing.d. the relationship between net income under absorption costing and net income undervariable costing cannot be predicted.arrow_forwardWhen units produced exceeds units sold,a. net income under absorption costing is higher than net income under variable costing.b. net income under absorption costing is lower than net income under variable blo costingc. net income under absorption costing equals net income under variable costing.d. the relationship between net income under absorption costing and net income under variable costing cannot be predicted.arrow_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_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_forwardSummarized data for Walrus Co. for its first year of operations are: Sales (110,000 units) $5,500,000 Production Costs (132,000 units): Direct Material 1,980,000 Direct Labor 1,584,000 Manufacturing Overhead: Variable 924,000 Fixed 330,000 Selling and Administrative Expenses: Variable 286,000 Fixed 473,000 A. Prepare an income statement under absorption costing. Walrus Co. Absorption Costing Income Statement Cost of Goods Sold:arrow_forwardWhich 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_forward
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