Question 1

In variable costing,all fixed manufacturing costs are expensed in the period incurred.

Accepted Answer

In variable costing, fixed manufacturing costs are expensed as period costs rather than being included in the cost of goods sold. This means that all fixed manufacturing costs are expensed in the period incurred.

Question 2

Greenlam Inc.started the year with 200 units in the Finished Goods Inventory account.It produced 600 units during the year and sold 800 units.If Greenlam uses variable costing:
A)its operating profit for the period will be higher than absorption costing.
B)its operating profit for the period will be lower than absorption costing.
C)its value of ending inventory reported in the balance sheet will be higher than absorption costing.
D)its operating profit will be the same under absorption costing.

Accepted Answer

Variable costing only includes variable manufacturing costs in the cost of goods sold, while absorption costing includes both variable and fixed manufacturing costs. Since Greenlam sold more units than it produced, its ending inventory will be lower under variable costing than absorption costing. This will result in a higher operating profit under variable costing.

Question 3

When there are no units in the beginning finished goods inventory and the units produced are more than the units sold,the operating income will be higher under absorption costing than variable costing.

Accepted Answer

Under absorption costing, fixed manufacturing costs are included in the cost of goods sold, which means the more units produced, the more fixed costs are allocated to each unit sold. This can result in a higher net operating income when there is no beginning inventory and more units are produced than sold. In contrast, variable costing only includes variable production costs in the cost of goods sold, regardless of whether there is beginning inventory or more units produced than sold, which can lead to a lower net operating income in this scenario.

Question 4

When all of the units produced are sold,the operating income will be the same under both the costing methods.(Assume no beginning inventories.)Which of the following gives the correct reason for the above statement?
A)all costs incurred have been recorded as expenses
B)a portion of the fixed manufacturing overhead is still in the Finished Goods Inventory account
C)all selling and administrative expenses have been recorded as period costs
D)fixed manufacturing costs have not been considered while calculating the operating profits

Accepted Answer

The statement is true because when all units are sold, all of the costs incurred in the production of those units will have been allocated to the products and recognized as expenses. Therefore, the operating income will be the same under both costing methods.

Question 5

When there are no units in the beginning finished goods inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of goods sold only when the units are sold, which can defer some expenses to future periods. This can result in higher operating income compared to variable costing, where all fixed manufacturing overhead is expensed in the period incurred.

Question 6

Under variable costing,the units in the beginning finished goods inventory contain manufacturing fixed costs.

Accepted Answer

Under variable costing, only variable manufacturing costs are included in inventory; fixed manufacturing costs are expensed in the period incurred.

Question 7

Flexlux Inc.reports the following information:  What is the unit product cost using variable costing?
A)$50
B)$55
C)$45
D)$65

Accepted Answer

The answer of Flexlux Inc.reports the following information:  What...

Question 8

In its first year of business,Greenlam Inc.produced and sold 600 units.If Greenlam uses variable costing,________.
A)its operating profit for the period will be higher than absorption costing
B)its operating profit for the period will be lower than absorption costing
C)its value of ending inventory reported in the balance sheet will be higher than absorption costing
D)its operating profit will be the same under absorption costing

Accepted Answer

In the first year, with no beginning inventory and all units produced being sold, operating profit will be the same under both variable and absorption costing.

Question 9

Fasetech Inc.has collected the following data for November (there are no beginning inventories):  What is the ending balance in finished goods inventory using variable costing if 450 units are sold?
A)$2,000
B)$2,250
C)$3,750
D)$2,850

Accepted Answer

The answer of Fasetech Inc.has collected the following data for...

Question 10

When production is less than sales,the operating income will be lower under absorption costing than variable costing.Assume zero ending inventories.Which of the following gives the correct reason for the above statement?
A)all costs incurred have been recorded as expenses
B)a portion of the fixed manufacturing overhead is still in the ending Finished Goods Inventory account
C)the units in the beginning finished goods inventory have manufacturing fixed costs assigned to them
D)fixed manufacturing costs have not been considered while calculating the operating profits

Accepted Answer

Under absorption costing, fixed manufacturing overhead costs are included in the cost of goods sold, which means they are assigned to the units produced. When production is less than sales, the beginning inventory (which includes fixed manufacturing costs) is sold, leading to higher costs and lower operating income compared to variable costing, where fixed costs are expensed in the period incurred.

Question 11

When all the units produced are sold,the profit calculated under absorption costing is higher when compared to the profit calculated under variable costing.

Accepted Answer

When all units produced are sold, both absorption and variable costing will yield the same profit because there are no ending inventories to affect the allocation of fixed manufacturing overhead costs.

Question 12

Which of the following costing methods charges all the manufacturing costs to the products?
A)variable costing
B)direct costing
C)absorption costing
D)contribution costing

Accepted Answer

Absorption costing charges all the manufacturing costs (both fixed and variable) to the products. Variable costing (A) only includes variable manufacturing costs. Direct costing (B) is not a recognized costing method. Contribution costing (D) is not a recognized costing method.

Question 13

Fasetech Inc.has collected the following data for November (there are no beginning inventories):  What is the operating income using absorption costing if 450 units are sold?
A)$2,570
B)$3,500
C)$3,650
D)$3,250

Accepted Answer

The answer of Fasetech Inc.has collected the following data for...

Question 14

When production is more than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning inventories.Which of the following gives the correct reason for the above statement?
A)all costs incurred have been recorded as expenses
B)a portion of the fixed manufacturing overhead is still in the ending Finished Goods Inventory account
C)all selling and administrative expenses have been recorded as period costs
D)fixed manufacturing costs have not been considered while calculating the operating profits

Accepted Answer

Under absorption costing, fixed manufacturing overhead costs are included in the cost of goods sold and allocated to units of product. When production exceeds sales, some of the fixed manufacturing overhead costs remain in the ending inventory account, resulting in a higher value of ending inventory and thus higher operating income under absorption costing. Variable costing, on the other hand, only includes variable manufacturing costs in the cost of goods sold and does not allocate fixed manufacturing overhead costs to units of product. Therefore, the ending inventory value is lower and the operating income is also lower under variable costing when production exceeds sales. Choice A is incorrect because regardless of the costing method, all costs incurred would be recorded as expenses. Choice C is incorrect because both absorption and variable costing separate selling and administrative expenses from the cost of goods sold. Choice D is incorrect because fixed manufacturing costs are included in the cost of goods sold under absorption costing.

Question 15

Kaycom Inc.reports the following information:  What is the amount of unit product cost that will be considered for external reporting purposes?
A)$45
B)$65
C)$85
D)$75

Accepted Answer

The given information includes a product code (TB3006_00) but doesn't provide any other details about the product or its costs. Therefore, we cannot determine the unit product cost from this information alone.

Question 16

Medbam Inc.has collected the following data for November (there are no beginning inventories):  What is the operating income using absorption costing?
A)$6,000
B)$3,500
C)$5,000
D)$4,500

Accepted Answer

The answer of Medbam Inc.has collected the following data for...

Question 17

A variable costing income statement is used for ________.
A)filing income tax returns
B)external reporting purposes
C)determining the amount of gross profit
D)internal decision making purposes

Accepted Answer

A variable costing income statement separates costs into fixed and variable categories, which can help decision makers analyze the profitability of their products and services. It is commonly used for internal decision making purposes, but is not typically used for external reporting or tax purposes.

Question 18

In its first year of business,Greenlam Inc.produced 600 units and sold 400 units.If Greenlam uses variable costing,________.
A)its operating profit for the period will be higher than absorption costing
B)its operating profit for the period will be lower than absorption costing
C)its value of ending inventory reported in the balance sheet will be higher than absorption costing
D)its operating profit will be the same under absorption costing

Accepted Answer

With variable costing, only the variable manufacturing costs are included in the cost of goods sold, while fixed manufacturing costs are treated as a period expense. As a result, if Greenlam sold fewer units than it produced, there will be some fixed manufacturing costs included in ending inventory, which will be carried forward to the next period. This will result in a higher reported value of ending inventory and a lower cost of goods sold under absorption costing, which will lead to a higher operating profit compared to variable costing. Therefore, the operating profit will be lower under variable costing compared to absorption costing.

Question 19

When there are no beginning or ending finished goods inventories,________.
A)variable and absorption costing will result in different values for ending finished goods inventories
B)variable and absorption costing will result in the same operating profits
C)variable and absorption costing will result in different sales revenue
D)variable and absorption costing will result in different values for cost of goods sold

Accepted Answer

When there are no beginning or ending finished goods inventories, variable and absorption costing will result in the same operating profit because there is no change in inventory to account for. Therefore, the only difference between variable and absorption costing would be in the cost of goods sold, which would not affect the operating profit.

Question 20

SailFind Inc.has collected the following data for November (there are no beginning inventories):  What is the operating income using variable costing if 450 units are sold?
A)$2,000
B)$3,500
C)$3,000
D)$2,500

Accepted Answer

The answer of SailFind Inc.has collected the following data for...

Quiz 21: Variable Costing

In variable costing,all fixed manufacturing costs are expensed in the period incurred.

Greenlam Inc.started the year with 200 units in the Finished Goods Inventory account.It produced 600 units during the year and sold 800 units.If Greenlam uses variable costing:

When there are no units in the beginning finished goods inventory and the units produced are more than the units sold,the operating income will be higher under absorption costing than variable costing.

When all of the units produced are sold,the operating income will be the same under both the costing methods.(Assume no beginning inventories.) Which of the following gives the correct reason for the above statement?

When there are no units in the beginning finished goods inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

Under variable costing,the units in the beginning finished goods inventory contain manufacturing fixed costs.

Flexlux Inc.reports the following information: What is the unit product cost using variable costing?

In its first year of business,Greenlam Inc.produced and sold 600 units.If Greenlam uses variable costing,________.

Fasetech Inc.has collected the following data for November (there are no beginning inventories) : What is the ending balance in finished goods inventory using variable costing if 450 units are sold?

When production is less than sales,the operating income will be lower under absorption costing than variable costing.Assume zero ending inventories.Which of the following gives the correct reason for the above statement?

When all the units produced are sold,the profit calculated under absorption costing is higher when compared to the profit calculated under variable costing.

Which of the following costing methods charges all the manufacturing costs to the products?

Fasetech Inc.has collected the following data for November (there are no beginning inventories) : What is the operating income using absorption costing if 450 units are sold?

When production is more than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning inventories.Which of the following gives the correct reason for the above statement?

Kaycom Inc.reports the following information: What is the amount of unit product cost that will be considered for external reporting purposes?

Medbam Inc.has collected the following data for November (there are no beginning inventories) : What is the operating income using absorption costing?

A variable costing income statement is used for ________.

In its first year of business,Greenlam Inc.produced 600 units and sold 400 units.If Greenlam uses variable costing,________.

When there are no beginning or ending finished goods inventories,________.

SailFind Inc.has collected the following data for November (there are no beginning inventories) : What is the operating income using variable costing if 450 units are sold?