KA2e_SelfStudy_Ch19

KA2e_SelfStudy_Ch19 - File: ch19, Chapter 19: Variable...

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File: ch19, Chapter 19: Variable Costing: A Decision-Making Perspective Multiple Choice 1. Fixed manufacturing overhead costs are recognized as: a) period costs under absorption costing. b) product costs under absorption costing. c) product costs under variable costing. d) part of ending inventory costs under both absorption and variable costing. Ans: b Response A: Fixed manufacturing overhead costs are recognized as product costs under absorption costing but a period cost under variable costing. Response B: Correct! Fixed manufacturing overhead costs are recognized as product costs under absorption costing but a period cost under variable costing. Response C: Fixed manufacturing overhead costs are recognized as product costs under absorption costing but a period cost under variable costing. Response D: Fixed manufacturing overhead costs are recognized as product costs under absorption costing but a period cost under variable costing. 2. Net income computed under absorption costing will be: a) higher than net income under variable costing in all cases. b) equal to net income under variable costing in all cases. c) higher than net income under variable costing when units produced are greater than units sold. d) higher than net income under variable costing when units produced are less than units sold. Ans: c Response A: Absorption costing will show a higher net income number than variable costing whenever units produced exceed units sold. Response B: Absorption costing will show a higher net income number than variable costing whenever units produced exceed units sold. Response C: Correct! Absorption costing will show a higher net income number than variable costing whenever units produced exceed units sold. Response D: Absorption costing will show a higher net income number than variable costing whenever units produced exceed units sold.
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3. A company will be in compliance with GAAP when it prepares financial statements in accordance with: a) cost-volume-profit principles. b) absorption costing principles. c) variable costing principles. d) all of the above methods. Ans: b Response A: GAAP requires that absorption costing be used for the costing of inventory for external reporting purposes. Response B: Correct! GAAP requires that absorption costing be used for the costing of
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This note was uploaded on 04/22/2009 for the course BCOR 2000 taught by Professor Brush during the Spring '07 term at Colorado.

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KA2e_SelfStudy_Ch19 - File: ch19, Chapter 19: Variable...

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