Appendix 5A - Appendix 5A - Variable Costing Appendix 5A...

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Unformatted text preview: Appendix 5A - Variable Costing Appendix 5A Variable Costing True / False Questions 1. The costs assigned to units in inventory are typically lower under absorption costing than under variable costing. True False 2. Under variable costing, product cost contains some fixed manufacturing overhead cost. True False 3. Variable selling and administrative expenses are part of product costs under the variable costing approach. True False 4. In a manufacturing company using absorption costing, the fixed costs associated with idle production capacity are commonly included as part of the product cost. True False 5. Direct labor is always considered to be a product cost under variable costing. True False 6. Suppose fewer units are sold in year 2 than in year 1. If production exceeds sales in year 2, net operating income under absorption costing could be higher in year 2 than in year 1. True False Appendix 5A-1 Appendix 5A - Variable Costing 7. When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. True False 8. If production exceeds sales for the period, variable costing net operating income will typically be greater than absorption costing net operating income. True False 9. When sales exceeds production for a period, absorption costing net operating income will generally be greater than variable costing net operating income. True False Multiple Choice Questions 10. Which of the following statements is true? A. When production exceeds sales, a manufacturing company's variable costing net operating income will usually be greater than its absorption costing net operating income. B. The variable costing method is usually not used for external reporting purposes. C. The absorption costing method treats fixed production costs as period costs. D. All of the above. 11. Which of the following statements is true for a company that uses variable costing? A. The unit product cost changes because of changes in the number of units manufactured. B. Profit fluctuates with sales. C. Any underapplied overhead is included in the product cost. D. Product costs include variable administration costs. Appendix 5A-2 Appendix 5A - Variable Costing 12. Which of the following statements is true for a company that uses variable costing? A. The unit product cost changes as a result of changes in the number of units manufactured. B. Both variable selling costs and variable production costs are included in the unit product cost. C. Net operating income moves in the same direction as sales....
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This note was uploaded on 05/03/2011 for the course ACC 1410 taught by Professor Bauser during the Spring '11 term at Marion Technical College.

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Appendix 5A - Appendix 5A - Variable Costing Appendix 5A...

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