Variable Costing Quiz1 - Midterm

In absorption costing, as contrasted with direct costing, the following are absorbed into inventory.

• All the elements of fixed and variable manufacturing overhead

• only the fixed manufacturing head

• Neither fixed nor variable manufacturing overhead

• only the variable manufacturing overhead

If production is greater than sales(units), then absorption costing net income will generally be

• greater than direct costing net income

• less than direct costing net income

• equal to direct costing net income

• additional data is needed to be able to answer

When all manufacturing cost is used in production are attached to the products, whether direct, or indirect, variable or fixed, this is called:

• process costing

• absorption costing

• variable costing

• job order costing

Under direct costing, which is classified as product costs?

• only variable production costs

• only direct costs

• all variable costs

• all variable and fixed production costs

Which of the following statements is correct?

• when production is higher than sales, absorption costing net income is lower than variable costing net income

• If all the products manufactured during the period are sold in that period, variable costing net income is equal to absorption costing net income

• when production is lower than sales, variable costing net income is lower than absorption net income

• when production and sales level are equal, variable costing net income is lower than absorption costing net income

Determine the following statements as true or false:

Statement 1: Direct costing and variable costing are different terms that mean the same thing

Statement 2: In a variable costing income statement, sales revenue is typically lower than in absorption costing income statement

• False:True

• False:False

• True:True

• True: False

The absorption costing method includes inventory: Fixed Factory Overhead and Variable Factory overhead

• No; No

• No; Yes

• Yes; Yes

• Yes; No

In an income statement prepared as internal report using the direct costing method, fixed selling and administrative expenses would

• Note be used

• Be used in the computation of contribution margin

• Be used in the computation of operating income but not in the computation of contribution margin

• Be treated the same as variable selling and administrative expenses

In an income statement prepared as an internal report using the variable costing method, variable selling and administrative expense would

• not be used

• be used in the computation of contribution margin

• be used in the computation of operating income but not in the computation of contribution margin

• be treated the same as fixed selling and administrative expenses

If sales equals production, one would expect net income under variable costing method to be

• the same as net income under absorption costing

• greater that net income under absorption costing method

• differing in as much as the difference between sales and production

• less than net income under the absorption costing method