Chapter 9 Test Bank

Chapter 9 Test Bank - CHAPTER 9 INVENTORY COSTING AND...

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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 Terms to Learn : absorption costing 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 Terms to Learn : variable costing 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 Terms to Learn : variable costing, absorption costing 4. Under variable costing, fixed manufacturing costs are treated as an expense of the period. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : variable costing 5. The contribution-margin format of the income statement is used with absorption costing. Answer : False Difficulty : 1 Objective : 2 Terms to Learn : absorption costing 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 Terms to Learn : variable costing The contribution-margin format of the income statement distinguishes variable costs from fixed costs. 9-1
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7. The gross-margin format of the income statement highlights the lump sum of fixed manufacturing costs. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : absorption costing The gross-margin format of the income statement distinguishes manufacturing costs from nonmanufacturing costs, but it does not highlight the lump sum of fixed manufacturing costs. 8. In absorption costing, all nonmanufacturing costs are subtracted from gross margin. Answer : True Difficulty : 1 Objective : 2 Terms to Learn : absorption costing 9. Direct costing is a perfect way to describe the variable-costing inventory method. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : direct costing Direct costing is a less than perfect way to describe this method because not all variable costs are inventoriable costs. 10. When variable costing is used, an income statement will show gross margin. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : variable costing When variable costing is used, an income statement will show contribution margin. 11. The income under variable costing will always be the same as the income under absorption costing. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : variable costing, absorption costing The income under variable costing will sometimes be the same as the income under absorption costing. 12.
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Chapter 9 Test Bank - CHAPTER 9 INVENTORY COSTING AND...

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