50 What will be the difference in net earnings computed using variable costing as opposed toabsorption costing if the ending inventory increases with respect to the beginning inventoriesin terms of units? *O There will be no difference in net earnings.O Net earnings computed using variable costing would be higher.O The difference in net earnings cannot be determined from the information given.O Net earnings computed using variable costing would be lower

Under variable costing, whole amount of fixed overhead will be charged in the income statement.…

Answered: What will be the difference in net…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 19MC: When the number of units in ending inventory increases through the year, which of the following is...

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The following data were adapted from a recent income statement of The Procter Gamble Company (PG): Assume that the variable amount of each category of operating costs is as follows: a. Based on the data given, prepare a variable costing income statement for Procter Gamble, assuming that the company maintained constant inventory levels during the period. b. If Procter Gamble reduced its inventories during the period, what impact would that have on the operating income determined under absorption costing?
When the number of units in ending inventory increases through the year, which of the following is true? A. Net income is the same for variable and absorption costing. B. Net income is higher for variable costing than for absorption costing. C. Net income is higher for absorption costing than for variable costing. D. There is no relationship between net Income and the costing method.
Inventory Valuation under Variable Costing Refer to the data for Judson Company above. Required: 1. How many units are in ending inventory? 2. Using variable costing, calculate the per-unit product cost. 3. What is the value of ending inventory under variable costing? Use the following information for Brief Exercises 3-21 and 3-22: During the most recent year, Judson Company had the following data associated with the product it makes:
What will be the difference in net earnings computed using variable costing as opposed toabsorption costing if the ending inventory increases with respect to the beginning inventories interms of units?a. There will be no difference in net earnings.b. Net earnings computed using variable costing will be higher.c. The difference in net earnings cannot be determined from the information given note.d. Net earnings computed using variable costing will be lower
Why is variable costing not in compliance with generally accepted accounting principles?a. Fixed manufacturing costs are assumed to be period costs.b. Variable costing procedures are not well known in industry.c. Net earnings are always overstated when using variable costing.d. Variable costing ignores the concept of lower of cost or market when valuing inventory.
The president of X Corporation requested you to explain the difference in profit between the variable costing income statement presentation and the absorption method. You would say that: * a. There is no difference if there is no change in the fixed costs in the beginning and ending inventories. b. The difference is equal to the fixed cost per unit times the number of units sold. c. The difference is attributable to the variable costs in the inventory. d. The difference is attributable to the fixed cost in ending inventory.
Identify if true or false When inventory decreases, the net operating income under absorption costing is ALWAYS lower than of variable costing. When inventory decreases the fixed manufacturing overhead is deferred in inventory. The change in production does not affect net operating income under variable costing system. *
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.
The costs assigned to units in inventory are typically lower under absorption costing thanunder vanable costinaTRUEFALSE Operating profits move in the same direction as sales when variable costing is used ifselling prices, the sales mix and the cost structure remain the sameTRUEFALSE Absorption costing is more compatible with cost-volume-profit analysis than is variablecosting.TRUEFALSE Variable manufacturing overhead costs are treated as period costs under bothabsorption and variable costingTRUEFALSE Operating profit is affected by changes in production under both the variable costing andabsorption costing approachesTRUEFALSE In a manufacturing company using absorption costing, the fixed costs associated withidle production capacity are commonly included as part of the product cost.TRUEFALSE In activity-based costing, some manufacturing costs may be excluded from product costsTRUEFALSE The margin of safety can be defined as the amount by which sales can decrease beforelosses are…
Which of the following is NOT true regarding an income statement organized according to thecontribution margin approach? Question 6 options: The contribution margin income statement is organized by cost behavior. Operating income will always be the same as operating income in a traditional income statement regardless of changes in inventory levels. All fixed costs, including fixed MOH, are expensed below the contribution margin line. The contribution margin is equal to sales revenue minus variable expenses.
In comparing the absorption and variable cost methods, each of the following statements is true except: a. SG&A fixed expenses are not included in inventory in either method. b. Only the absorption method may be used for external financial reporting. c. Variable costing charges fixed overhead costs to the period they are incurred. d. When inventory increases over the period, variable net income will exceed absorption net income.
First: When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. Second: Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when sales volume exceeds production volume. * a. Both statements are true b. Only the first statement is true c. Only the second statement is true d. Both statements are false

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