The product costing method that assigns only variable manufacturing costs to products is called? _______ costing.
A. Period
B. Absorption
C. Variable
D. Fixed
C. Variable
Companies are required to use absorption costing for financial reporting purposes because GAAP requires its use in the preparation of financial statements for external users.
True
Variable costing
A. Emphasizes the contribution margin format of an income statement
B. Includes fixed manufacturing overhead as a product cost
C. Uses Cost of Goods Sold to calculate contribution margin
D. Highlights gross profit on the income statement
A. Emphasizes the contribution margin format of an income statement
Absorption costing includes fixed manufacturing overhead as a product cost.
True
Selling and administrative expenses are included as product costs in absorption? costing, but not in variable costing.
False
Operating income will be the same between variable costing and absorption costing when the production of units equals the sales of units during a period.
True
When the production of units exceeds the sales of units during a? period, operating income will be higher under variable costing than absorption costing.
False
When the production of units exceeds the sales of units during a? period, the Finished Goods Inventory balance will be higher under absorption costing compared to variable costing because
A. Selling and administrative costs are included in Finished Goods
B. Fixed manufacturing overhead costs are included in Finished Goods Inventory for absorption? costing, but not for variable costing
Under variable? costing, the units in beginning inventory have manufacturing fixed costs assigned to them.
False
Management prefers to use absorption costing for planning and control decisions because it is less likely for production supervisors to manipulate production levels to earn incentive bonuses based on operating income for a period.
False
Management should use variable costing rather than absorption costing when determining product costs for? long-term planning on sales prices.
False
Lower level managers should use variable costing rather than absorption costing for cost control decisions because lower level managers usually do not have control over most fixed costs.
True
Why is variable costing considered more appropriate for? short-term production planning? decisions?
A. Because variable costing uses a traditional income statement approach which is more beneficial to lower level managers for? short-term decision making
B
D. Because with capacity limits in the? short-term, products with the highest contribution margin should be produced
An identifiable part of the company for which financial information is available is called? a(n)
A. Accounting Segment
B. Financial Operation
C. Business Division
D. Business Segment
D. Business Segment
Which of the following would be a reason why a? company's contribution margin ratio for a product would decrease from one period to the? next?
A. There was an increase in the? product's sales price
B. There was an increase in the? product's fixed manufact
D. There was an increase in the? product's variable costs
When analyzing contribution? margin, variable costing is preferred to absorption costing because fixed costs do not affect the contribution margin.
True
Because a service company does not sell any? inventory, service companies only have fixed costs.
False
JR's Towing Services has the following information for their? year-ended December? 31, 2016?: Fixed Costs? = $95,000?; Variable Costs? = $120,000, and Towing Revenue of $250,000. What? JR's contribution margin ratio for 2016??
A. 79%
B. 86%
C. 38%
D. 52%
D. 52%
When a business has two or more business? segments, what is meant by the term? "common costs"?
A. Costs that are relevant to determining the contribution margin of each business segment
B. Costs that vary depending on the level of activity in a business s
C. Costs a company incurs that supports more than one business segment
Which of the following would not be a reason why the total contribution margin of one Business Segment A would be higher than Business Segment? B? ?(check all that? apply)
A. The total revenue of Business Segment A is higher than Business Segment B
B. The
C. The total fixed costs of Business Segment A are lower than Business Segment B
D. The total fixed costs of Business Segment A are higher than Business Segment B
The primary difference between variable costing and absorption costing is
A. in variable? costing, variable selling and administrative costs are product costs.
B. in absorption? costing, fixed manufacturing overhead is a product cost.
C. in absorption? co
B. in absorption? costing, fixed manufacturing overhead is a product cost.
?Winters, Inc. is preparing financial statements to be distributed to investors and creditors. The company should prepare the income statement using
A. variable costing because it follows GAAP.
B. absorption costing because it is better for controlling pu
C. absorption costing because it follows GAAP.