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When units produced equal units sold, reported income is identical under absorption costing and variable costing.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter18: Pricing And Profitability Analysis

Section: Chapter Questions

Problem 11DQ: How does absorption costing differ from variable costing? When will absorption-costing operating...

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When units produced equal units sold, reported income is identical under absorption costing and variable costing.
True or False
True
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How does absorption costing differ from variable costing? When will absorption-costing operating income exceed variable-costing operating income?
When units produced are less than units sold, income under absorption costing is higher than income under variable costing. True or False True False
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.
Explain the difference between variable costing and absorption costing incomestatements. Provide a hypothetical income statement in both formats in which thenumber of units sold is different than the number of units manufactured. Explain thecontrast between the two formats.
TRUE OR FALSE When units sold exceed, units produced, income under absorption costing is higher than income under variable costing.
When 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.
True/False 1. Under absorption costing, the company calculates gross margin 2.
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.
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.
The gross-margin format is used for A. mixed costing income statement B. absorption costing income statement C. variable costing income statement D. standard costing income statement
TRUE OR FALSE Net income under variable costing is closely tied to changes in sales levels.
The following data were provided by Rider, Inc, which produces a single product that it sells for $25 per unit: Units in beginning inventory Units produced Units sold Variable costs, per unit: direct materials direct labor manufacturing overhead selling and admin ixed costs, in total: manufacturing overheal selling and admin 0 5,000 4,000 $4.00 $3.00 $3.00 $4.00 $15,000 $10,000 the year in question, one would expect the net operating income under absorption costing to be: