Consider the statements that follow.
1. Variable selling costs are expensed when incurred.
2. The income statement discloses a company's contribution margin.
3. Fixed manufacturing overhead is attached to each unit produced.
4. Direct labour becomes part of a unit's cost.
5. Sales revenue minus cost of goods sold equals contribution margin.
6. This method must be used for external financial reporting.
7. Fixed selling and administrative expenses are treated in the same manner as fixed manufacturing overhead.
8. This method is sometimes called full costing.
9. This method requires the calculation of a fixed manufacturing cost per unit.
Required:
Determine which of the nine statements:
A. Relate to neither absorption costing nor variable costing.
B. Relate to both absorption costing and variable costing.
C. Relate only to absorption costing.
D. Relate only to variable costing.

Question

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The Answer of Consider the statements that follow.
1. Variable selling costs are expensed when incurred.
2. The income statement discloses a company's contribution margin.
3. Fixed manufacturing overhead is attached to each unit produced.
4. Direct labour becomes part of a unit's cost.
5. Sales revenue minus cost of goods sold equals contribution margin.
6. This method must be used for external financial reporting.
7. Fixed selling and administrative expenses are treated in the same manner as fixed manufacturing overhead.
8. This method is sometimes called full costing.
9. This method requires the calculation of a fixed manufacturing cost per unit.
Required:
Determine which of the nine statements:
A. Relate to neither absorption costing nor variable costing.
B. Relate to both absorption costing and variable costing.
C. Relate only to absorption costing.
D. Relate only to variable costing.

Consider the Statements That Follow