Consider the following comments about absorption- and variable-costing income statements:
I. A variable-costing income statement discloses a firm's contribution margin.
II. Cost of goods sold on an absorption-costing income statement includes fixed costs.
III. The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements.
Which of the above statements is (are) true?
A) I only.
B) II only.
C) I and II.
D) II and III.
E) I, II, and III.

Question

Quizplus · Accepted Answer

I. True, a variable-costing income statement separates variable costs from fixed costs, allowing the contribution margin (sales minus variable costs) to be clearly identified.II. True, absorption costing includes all manufacturing costs in the cost of goods sold, both variable and fixed.III. True, variable selling and administrative costs remain the same under both costing methods, as the distinction between absorption and variable costing primarily affects how manufacturing costs are treated, not selling and administrative costs.

Consider the Following Comments About Absorption- and Variable-Costing Income Statements