First: When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. Second: Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when sales volume exceeds production volume.

First: When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. Second: Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when sales volume exceeds production volume.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter12: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 4SEQ: For which cost concept used in applying (he cost-plus, approach to product pricing are fixed...

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Product 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 increases
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.
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 *…
First: The inventory value shown on the balance sheet is generally higher under absorption costing than under variable costing. Second: Under variable costing, inventoriable product costs consist of direct materials, direct labor, variable manufacturing overhead and variable selling and administration expenses. * a. Both statements are true b. Only the first statement is true c. Only the second statement is true d. Both statements are false
Choose the letter of the correct answer 1. Statement 1: Product cost under Variable costing are Direct Material, Direct Material and Variable Overhead only. Statement 2: Under absorption costing, Factory Overhead is considered as indirect product cost. A. Both statements are True B. Both statements are False C. Statement 1 is true. Statement 2 is false D. Statement 1 is false. Statement 2 is true 2. Statement 1. Selling cost is treated as expenses under variable costing. Statement 2. If sales for a period exceed production, then variable costing income will be higher than absorption costing income. A. Both statements are True B. Both statements are False C. Statement 1 is true. Statement 2 is false D. Statement 1 is false. Statement 2 is true
Statement 1. Selling cost is treated as expenses under variable costing. Statement 2. If sales for a period exceed production, then variable costing income will be higher than absorption costing income. A. Both statements are True B. Both statements are False C. Statement 1 is true. Statement 2 is false D. Statement 1 is false. Statement 2 is true
Which of the following statements regarding absorption and variable costing is correct? A Absorption costing results in higher income when 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 two costing methods.
1.) When production is greater than sales, fixed manufacturing overhead costs are a. Deferred in inventory under variable costingb. Deferred in inventory under absorption costingc. Released from inventory under variable costingd. Released from inventory under absorption costing
S1: When reconciling variable costing and absorption costing net operating income, fixed overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. S2: When the number of units in inventories decrease between the beginning and end of the period, net operating income under absorption costing will typically be greater than under variable costing. a. both are true b. both are false c. S1 is true d. S2 is true
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.
Which TWO of the following statements concerning marginal costing are TRUE? A. Closing inventories are valued at full production cost. B. Fixed costs are treated as a period cost and are charged in full to the income statement of the accounting period in which they are incurred. O.C. Marginal cost is the cost of a unit which would be avoided if that unit were not produced. OD. Contribution is calculated as sales revenue plus all variable costs.
When production exceeds sales, the net operating income reported under absorption costing generally will be ___________ net operating income under variable costing. A. less than B. greater than C. equal to D. greater than or less than For external-reporting purposes, GAAP require that net income be based on _______ costing method. A. absorption B. variable C. direct D. semi-variable E. activity based