Cost15EChapter09_Solutions - CHAPTER 9 INVENTORY COSTING...

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CHAPTER 9INVENTORY COSTING AND CAPACITY ANALYSIS9-1No. Differences in operating income between variable costing and absorption costing aredue to accounting for fixed manufacturingcosts. Under variable costing, only variablemanufacturing costs are included as inventoriable costs. Under absorption costing, both variableand fixed manufacturing costs are included as inventoriable costs. Fixed marketing anddistribution costs are not accounted for differently under variable costing and absorption costing.9-2The term direct costingis a misnomer for variable costing for two reasons:a.Variable costing does not include all direct costs as inventoriable costs. Only variabledirect manufacturing costs are included. Any fixed direct manufacturing costs and anydirect nonmanufacturing costs (either variable or fixed) are excluded frominventoriable costs.b.Variable costing includes as inventoriable costs not only direct manufacturing costsbut also some indirect costs (variable indirect manufacturing costs).9-3
9-4The main issue between variable costing and absorption costing is the proper timing ofthe release of fixed manufacturing costs as costs of the period:

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