Question 1

All of the following costs are inventoried under absorption costing except:
A) direct materials.
B) direct labor.
C) variable manufacturing overhead.
D) fixed manufacturing overhead.
E) fixed administrative salaries.

Accepted Answer

Under absorption costing, all manufacturing costs (direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead) are inventoried. Fixed administrative salaries, however, are considered period costs and are not inventoried but expensed in the period incurred.

Question 2

All of the following are inventoried under variable costing except:
A) direct materials.
B) direct labor.
C) variable manufacturing overhead.
D) fixed manufacturing overhead.
E) variable manufacturing overhead and fixed manufacturing overhead.

Accepted Answer

Under variable costing, only the variable costs are inventoried. Fixed manufacturing overhead is treated as a period cost and is not included in the inventory valuation. Direct materials, direct labor, and variable manufacturing overhead are considered variable costs and are inventoried.

Question 3

Absorption costing is inconsistent with CVP analysis.

Accepted Answer

Absorption costing includes fixed manufacturing overhead in product costs, which can distort the relationship between costs, volume, and profit, making it inconsistent with CVP analysis that relies on variable costing.

Question 4

Cost-volume-profit analysis and break-even calculations account for fixed manufacturing overhead as a lump sum.

Accepted Answer

Cost-volume-profit analysis and break-even calculations treat fixed manufacturing overhead as a lump sum that does not change with the level of production or sales volume, focusing instead on how variable costs and sales affect profit.

Question 5

On an absorption-costing income statement, fixed overhead costs are period costs.

Accepted Answer

In absorption costing, fixed overhead costs are allocated to the products produced and are included in the cost of goods sold, not treated as period costs. Period costs are expenses that are not tied to the production process and are expensed in the period they are incurred.

Question 6

The quality of conformance refers to how well a product is conceived or designed for its intended use.

Accepted Answer

The quality of conformance refers to the degree to which the product or service meets the specifications of the design, not how well it is conceived or designed for its intended use.

Question 7

Total quality management or TQM refers to the broad set of management and control processes designed to focus the entire organization and all of its employees on providing products or services that do the best possible job of satisfying the customer.

Accepted Answer

Total Quality Management (TQM) is indeed a comprehensive approach that emphasizes the importance of continuous improvement and focuses on ensuring that all members of an organization work towards common goals of improving product quality and enhancing customer satisfaction.

Question 8

Variable manufacturing overhead becomes part of a unit's cost when variable costing is used.

Accepted Answer

Variable manufacturing overhead is applied to units produced in the period under variable costing, making it part of the unit's cost.

Question 9

An analytical method that aims at achieving near-perfect results in a production process is known as the zero-defect perspective.

Accepted Answer

The answer of An analytical method that aims at achieving...

Question 10

All of the following are expensed under variable costing except:
A) variable manufacturing overhead.
B) fixed manufacturing overhead.
C) variable selling and administrative costs.
D) fixed selling and administrative costs.
E) variable selling and administrative costs and fixed selling and administrative costs.

Accepted Answer

The answer of All of the following are expensed under...

Question 11

When discussing the costs of quality, the costs of determining whether defects exist are known as appraisal costs.

Accepted Answer

Appraisal costs are the costs associated with measuring, evaluating, or auditing products or services to assure conformance to quality standards and performance requirements. This includes the costs of determining whether defects exist.

Question 12

Hid?den private environmental costs are those that are caused by environmental issues but have not been so identified by the accounting system.

Accepted Answer

Hidden private environmental costs refer to the expenses related to environmental degradation or resource depletion that a company incurs but are not captured or recognized by its accounting system. These costs are "hidden" because they are not directly accounted for in financial statements or operational budgets, often leading to an underestimation of the true economic impact of environmental issues on the business.

Question 13

On a global scale, there are four primary environmental agreements addressing the atmosphere, hazardous substances, the marine environment, nature conservation, and nuclear power issues.

Accepted Answer

There are more than four primary environmental agreements globally, addressing a wide range of issues including but not limited to the atmosphere, hazardous substances, the marine environment, nature conservation, and nuclear power. These agreements encompass various specific topics and are numerous, covering different aspects of environmental protection and conservation.

Question 14

Fixed manufacturing overhead is not inventoried under absorption costing.

Accepted Answer

Under absorption costing, fixed manufacturing overhead is treated as a product cost and therefore is inventoried along with direct materials, direct labor, and variable manufacturing overhead.

Question 15

On a variable-costing income state?ment, fixed overhead is not treated as a period cost.

Accepted Answer

On a variable-costing income statement, fixed overhead is treated as a period cost and is not allocated to the cost of products.

Question 16

Income reported under absorption and variable costing can be reconciled by focusing on the effects of the five places where the two statements differ.

Accepted Answer

Income reported under absorption and variable costing differs primarily due to how fixed manufacturing overhead is treated, not necessarily five specific places where the statements differ.

Question 17

Under variable costing, fixed manufacturing overhead is:
A) expensed immediately when incurred.
B) never expensed.
C) applied directly to Finished-Goods Inventory.
D) applied directly to Work-in-Process Inventory.
E) treated in the same manner as variable manufacturing overhead.

Accepted Answer

Under variable costing, fixed manufacturing overhead is expensed immediately when incurred, rather than being allocated to the cost of production. This contrasts with absorption costing, where fixed manufacturing overhead is allocated to products and expensed as the products are sold.

Question 18

On a variable-costing income state?ment, the cost of goods sold is measured at variable cost, which includes direct material, direct labor, and variable manufacturing overhead.

Accepted Answer

Variable costing only includes costs that vary with output (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold, excluding fixed manufacturing overhead.

Question 19

Absorption costing is required for tax purposes.

Accepted Answer

Absorption costing is required by tax authorities because it includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product, which is necessary for accurately reporting the cost of goods sold and inventory valuation on tax returns.

Question 20

When units sold exceed units produced, absorption-costing income will be lower than variable-costing income.

Accepted Answer

When units sold exceed units produced, ending inventory decreases. Under absorption costing, fixed manufacturing costs are assigned to units produced, not units sold. Therefore, absorption-costing income will be lower than variable-costing income, which assigns fixed manufacturing costs to units sold.

Quiz 8: Variable Costing and the Costs of Quality and Sustainability

All of the following costs are inventoried under absorption costing except:

All of the following are inventoried under variable costing except: