Which of the following statements is(are)false?
(A)All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.
(B)If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.
A) Only A is false.
B) Only B is false.
C) Both A and B are false.
D) Neither A nor B is false.

Question

Which of the following statements is(are)false?
 (A)All variances should be prorated to inventories and cost of goods sold at the end of the accounting period.
(B)If the number of units produced exceeds the number of units sold,the full-absorption operating profit will be lower than variable costing operating profit.
A) Only A is false.
B) Only B is false.
C) Both A and B are false.
D) Neither A nor B is false.

Quizplus · Accepted Answer

Statement A is false because not all variances should be prorated to inventories and cost of goods sold at the end of the accounting period. Only certain variances, such as direct materials and direct labor variances, should be prorated. Statement B is also false because if the number of units produced exceeds the number of units sold, then the full-absorption operating profit will be higher than the variable costing operating profit. This is because under absorption costing, fixed manufacturing overhead costs are included in the cost of goods sold and inventory, while under variable costing, these costs are expensed in the period in which they are incurred.

Which of the Following Statements Is(are)false