ch09tif - CHAPTER 9: INVENTORY COSTING AND CAPACITY...

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CHAPTER 9: INVENTORY COSTING AND CAPACITY ANALYSIS TRUE/FALSE 1. Absorption costing “absorbs” only variable manufacturing costs. Answer : False Difficulty : 1 Objective : 1 Absorption costing “absorbs” all manufacturing costs, both fixed and variable. 2. Variable costing includes all variable costs – both manufacturing and nonmanufacturing – in inventory. Answer : False Difficulty : 1 Objective : 1 Variable costing includes only manufacturing variable costs in inventory. 3. Under both variable and absorption costing, all variable manufacturing costs are inventoriable costs. Answer : True Difficulty : 1 Objective : 1 4. Under variable costing, fixed manufacturing costs are treated as an expense of the period. Answer : True Difficulty : 1 Objective : 1 5. The contribution-margin format of the income statement is used with absorption costing. Answer : False Difficulty : 1 Objective : 2 The contribution-margin format of the income statement is used with variable costing. 6. The contribution-margin format of the income statement distinguishes manufacturing costs from nonmanufacturing costs. Answer : False Difficulty : 1 Objective : 2 The contribution-margin format of the income statement distinguishes variable costs from fixed costs. 7. The gross-margin format of the income statement highlights the lump sum of fixed manufacturing costs. Answer : False Difficulty : 2 Objective : 2 The gross-margin format of the income statement distinguishes manufacturing costs from nonmanufacturing costs, but does not highlight the lump sum of fixed manufacturing costs. Chapter 9 Page 1
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8. In absorption costing, all nonmanufacturing costs are subtracted from gross margin. Answer : True Difficulty : 1 Objective : 2 9. Direct costing is a perfect way to describe the variable-costing inventory method. Answer : False Difficulty : 2 Objective : 2 Direct costing is a less than perfect way to describe this method because not all variable costs are inventoriable costs. 10. When production deviates from the denominator level, a production-volume variance always exists under absorption costing. Answer : True Difficulty : 1 Objective : 3 11. Fixed manufacturing costs included in cost of goods available for sale + the production- volume variance will always = total fixed manufacturing costs under absorption costing. Answer : True Difficulty : 1 Objective : 3 12. The production-volume variance only exists under absorption costing and not under variable costing. Answer : True Difficulty : 1 Objective : 3 13. When the unit level of inventory increases during an accounting period, operating income is greater under variable costing than absorption costing. Answer : False Difficulty : 3 Objective : 3 Greater operating income is reported under variable costing than absorption costing when the unit level of inventory decreases during an accounting period. 14.
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This note was uploaded on 04/29/2011 for the course ACCT 3001 taught by Professor Erickson during the Spring '10 term at University of Minnesota Duluth.

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ch09tif - CHAPTER 9: INVENTORY COSTING AND CAPACITY...

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