In comparing the absorption and variable cost methods, each of the following statements is true except: SG&A fixed expenses are not included in inventory in either method. Only the absorption method may be used for external financial reporting. Variable costing charges fixed overhead costs to the period they are incurred. When inventory increases over the period, variable net income will exceed absorption net income.

Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management analysis
Section: Chapter Questions
Problem 7E: The following data were adapted from a recent income statement of The Procter Gamble Company (PG):...
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In comparing the absorption and variable cost methods, each of the following statements is true except:

  1. SG&A fixed expenses are not included in inventory in either method.
  2. Only the absorption method may be used for external financial reporting.
  3. Variable costing charges fixed overhead costs to the period they are incurred.
  4. When inventory increases over the period, variable net income will exceed absorption net income.
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