Under absorption costing, fixed overhead is allocated to products sold, so when
production is greater than units sold, net income will be
calculated under variable costing.
Naples Company produced 650,000 units and sold 500,000 units. Their unit
selling price is $10. Cost of goods sold is $6 per unit. Fixed selling expenses are
$10,000 and variable selling and administrative expenses are $3 per unit.
Compute Naple’s net income under absorption costing.
Trudy Company is using variable costing. Which of the following items would be
shown on Trudy’s income statement?
Variable expenses, net income, and
Under absorption costing, expenses are grouped according to
True or false: When units produced are less than units sold, net income under
absorption costing will be less than net income computed under variable costing.
Differences in income between variable costing and absorption costing is due to
True or false: Absorption costing is used for external reporting.
To restate variable costing income to absorption costing income, add fixed
production cost in
inventory to variable costing income.
A system of rewarding managers by linking bonuses to income computed unfer
absorption costing may result in:
excess inventory buildup.
Landow Company uses variable costing for internal purposes and wants to
restate income to that of absorption costing for external reporting purposes.
Landow’s income under variable costing is $630,000. Fixed production cost in
ending inventory is $120,000 and $85,000 in beginning inventory. What is