Question 1

For a period during which the quantity of product manufactured equals the quantity sold,income from operations reported under absorption costing will be smaller than the income from operations reported under variable costing.

Accepted Answer

Absorption costing allocates fixed manufacturing overhead costs to units of product, regardless of whether they are sold or not, while variable costing only includes variable costs, such as direct materials and direct labor. Therefore, during a period where the quantity sold equals the quantity manufactured, absorption costing will report higher net income as fixed costs are spread over more units.

Question 2

The contribution margin and the manufacturing margin are usually equal.

Accepted Answer

The contribution margin is the difference between total sales and variable expenses, while the manufacturing margin is the difference between total sales and cost of goods sold. These two margins are not necessarily equal, as fixed expenses also need to be taken into account when calculating the manufacturing margin.

Question 3

Another name for variable costing is:

Accepted Answer

Variable costing is also known as direct costing because it only considers direct costs (variable costs) in the determination of product costs.

Question 4

For a period during which the quantity of product manufactured was less than the quantity sold,income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

Accepted Answer

This is because under absorption costing, a portion of fixed manufacturing costs are allocated to each unit produced, regardless of whether those units are actually sold or not. This results in higher inventory costs and lower cost of goods sold, leading to a lower income from operations compared to variable costing which only includes variable manufacturing costs in cost of goods sold.

Question 5

For a period during which the quantity of inventory at the end equals the inventory at the beginning,income from operations reported under variable costing will equal income from operations reported under absorption costing.

Accepted Answer

This is true because when the quantity of inventory at the end equals the inventory at the beginning, there is no change in the inventory level during the period. As a result, the difference between variable costing and absorption costing is eliminated, and both methods will report the same income from operations. However, if there is a change in inventory level, the two methods may report different income from operations.

Question 6

For a period during which the quantity of inventory at the end was smaller than that at the beginning,income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Accepted Answer

Under variable costing, fixed manufacturing overhead is expensed in the period incurred, not included in the product cost. Therefore, if inventory decreases, less fixed manufacturing overhead is released from inventory under absorption costing, leading to higher expenses and lower income compared to variable costing for that period.

Question 7

For a period during which the quantity of product manufactured equals the quantity sold,income from operations reported under absorption costing will equal the income from operations reported under variable costing.

Accepted Answer

When the quantity of product manufactured equals the quantity sold, there is no change in inventory levels, and therefore, the fixed manufacturing overhead costs that were incurred during the production process are matched directly with the revenue earned from the sale of the product. As both absorption costing and variable costing methods include the variable costs of production, the income from operations reported under both methods will be the same. Therefore, the statement is true.

Question 8

For a period during which the quantity of product manufactured exceeded the quantity sold,income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

Accepted Answer

Absorption costing involves assigning fixed manufacturing overhead costs to units produced, while variable costing only includes variable manufacturing costs. In a period where more units are produced than sold, absorption costing will allocate fixed costs to more units, resulting in a higher income from operations than variable costing.

Question 9

For a period during which the quantity of inventory at the end equals the inventory at the beginning,income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Accepted Answer

When the quantity of inventory at the end equals the inventory at the beginning, there is no change in the level of inventory, hence no difference between the two costing methods. The difference in income between the two methods arises only when there is a change in inventory levels between the beginning and end of the period. Therefore, the statement is false.

Question 10

For a period during which the quantity of inventory at the end was larger than that at the beginning,income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

Accepted Answer

Under variable costing, only variable manufacturing costs are included in product costs, whereas under absorption costing, both variable and fixed manufacturing costs are included. If inventory increases, absorption costing allocates some fixed costs to the additional inventory, reducing the expense recognized during the period and potentially increasing reported income compared to variable costing, where all fixed costs are expensed in the period incurred.

Question 11

For a period during which the quantity of product manufactured was less than the quantity sold,income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of goods sold, so if production is less than sales, some fixed costs remain in inventory, reducing expenses and increasing income. Under variable costing, all fixed costs are expensed in the period incurred, leading to lower income when production is less than sales.

Question 12

For a period during which the quantity of inventory at the end was larger than that at the beginning,income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Accepted Answer

Under variable costing, fixed manufacturing costs are treated as period expenses and are not included in the cost of goods sold. Therefore, if ending inventory is larger than beginning inventory, more fixed manufacturing costs will be deferred to the next period, causing income from operations to be lower under variable costing compared to absorption costing.

Question 13

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost,direct labor cost,and variable factory overhead cost?

Accepted Answer

Variable costing is the accounting method that includes only direct materials, direct labor, and variable manufacturing overhead costs as product costs. This contrasts with absorption costing, which also includes fixed manufacturing overhead in product costs.

Question 14

Under absorption costing,which of the following costs would not be included in finished goods inventory?

Accepted Answer

Variable and fixed selling and administrative expenses are not included in finished goods inventory under absorption costing, as they are considered period costs and are expensed in the period in which they are incurred. Direct labor cost, direct materials cost, and variable and fixed factory overhead cost are included in finished goods inventory.

Question 15

On the variable costing income statement,variable costs are deducted from contribution margin to yield manufacturing margin.

Accepted Answer

On the variable costing income statement, sales revenue is first reduced by variable costs to yield the contribution margin, not the other way around.

Question 16

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost,direct labor cost,and all factory overhead cost?

Accepted Answer

Absorption costing is a widely used concept that involves allocating all manufacturing costs, including direct materials cost, direct labor cost, and factory overhead cost, to the manufactured products. This approach is also known as full costing as it considers all expenses related to the production process. So, option C is the correct choice. Standard costing is a technique that involves setting predetermined standards for each element of manufacturing costs to determine the total cost. Variable costing only considers variable costs and does not allocate fixed costs to products. Marginal costing is another name for variable costing.

Question 17

For a period during which the quantity of product manufactured exceeded the quantity sold,income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

Accepted Answer

Under absorption costing, fixed manufacturing overhead is allocated to each unit produced, so when production exceeds sales, some of the fixed manufacturing overhead costs are included in the ending inventory and not expensed in the current period. This results in higher reported income from operations compared to variable costing, where all fixed manufacturing overhead costs are expensed in the period they are incurred, regardless of the level of sales.

Question 18

On the variable costing income statement,the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

Accepted Answer

This is because variable costing only considers variable costs (such as direct materials, direct labor, and variable overhead) as part of cost of goods sold and calculates a contribution margin (sales revenue minus variable costs). Fixed manufacturing costs and fixed selling and administrative expenses are considered as period costs and are expensed in the period they are incurred, which means they are deducted from the contribution margin to arrive at income from operations. Therefore, the difference between the contribution margin and income from operations represents fixed costs.

Question 19

For an accounting period during which the quantity of inventory at the end was smaller than the quantity at the beginning,income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

Accepted Answer

Under variable costing, only variable manufacturing costs are included in the cost of goods sold, while fixed manufacturing costs are treated as period expenses. Therefore, a decrease in inventory will result in a higher cost of goods sold and a higher income from operations. In contrast, under absorption costing, fixed manufacturing costs are included in the cost of goods sold, so a decrease in inventory will result in a lower cost of goods sold and a lower income from operations.

Question 20

Under absorption costing,which of the following costs would not be included in finished goods inventory?

Accepted Answer

Salaries for salespeople are considered as period costs and are expensed in the current period instead of being included in the cost of goods sold or finished goods inventory under absorption costing.

Quiz 20: Variable Costing for Management Analysis

For a period during which the quantity of product manufactured equals the quantity sold,income from operations reported under absorption costing will be smaller than the income from operations reported under variable costing.

The contribution margin and the manufacturing margin are usually equal.

Another name for variable costing is:

For a period during which the quantity of product manufactured was less than the quantity sold,income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

For a period during which the quantity of inventory at the end equals the inventory at the beginning,income from operations reported under variable costing will equal income from operations reported under absorption costing.

For a period during which the quantity of inventory at the end was smaller than that at the beginning,income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

For a period during which the quantity of product manufactured equals the quantity sold,income from operations reported under absorption costing will equal the income from operations reported under variable costing.

For a period during which the quantity of product manufactured exceeded the quantity sold,income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

For a period during which the quantity of inventory at the end equals the inventory at the beginning,income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

For a period during which the quantity of inventory at the end was larger than that at the beginning,income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

For a period during which the quantity of product manufactured was less than the quantity sold,income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

For a period during which the quantity of inventory at the end was larger than that at the beginning,income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost,direct labor cost,and variable factory overhead cost?

Under absorption costing,which of the following costs would not be included in finished goods inventory?

On the variable costing income statement,variable costs are deducted from contribution margin to yield manufacturing margin.

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost,direct labor cost,and all factory overhead cost?

For a period during which the quantity of product manufactured exceeded the quantity sold,income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

On the variable costing income statement,the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

For an accounting period during which the quantity of inventory at the end was smaller than the quantity at the beginning,income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

Under absorption costing,which of the following costs would not be included in finished goods inventory?