Managerial Financial Accounting Chapter 5 Practice Quiz -...

Managerial Financial Accounting Chapter 5 Practice Quiz
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Unformatted text preview: Self Study, Question 1 Correct! Full costing includes direct materials, direct labor, and both fixed and variable manufacturing overhead in inventoriable costs. Variable costing omits fixed manufacturing overhead from product costs. Full costing differs from variable costing in that: full costing excludes selling costs from consideration. full costing excludes administrative costs from consideration. full costing includes variable manufacturing overhead in inventory. full costing includes fixed manufacturing overhead in inventory. Self Study, Question 2 Correct! The difference in net income is caused by the handling of fixed manufacturing overhead. Under full costing, these costs are included in unsold inventory, while under variable costing, these items are treated as period expenses. As a result, if more units are produced than sold, under full costing, some costs remain on the balance sheet, while under variable costing, fixed manufacturing overhead cost is expensed. If units produced exceed units sold: full costing and variable costing yield the same income. full costing yields a higher income than variable costing. full costing yields a lower income than variable costing. Self Study, Question 3 Correct! Since JIT management concepts minimize inventories at all levels, the effects of fixed manufacturing overhead are significantly reduced. Use of a just-in-time inventory management system is likely to: decrease the difference between variable and full costing income. have no effect on the difference between variable and full costing income....
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