When inventories are decreasing, _________ costing will lead to lower profits because ______________: a. Variable; overheads are expensed to profits during the year b. Variable; overheads are retained in inventory values c. None of the available options is correct d. Absorption; capitalised overheads are retained in inventory values e. Absorption; capitalised overheads are released to profit during the year

When inventories are decreasing, _ costing will lead to lower profits because ______: a. Variable; overheads are expensed to profits during the year b. Variable; overheads are retained in inventory values c. None of the available options is correct d. Absorption; capitalised overheads are retained in inventory values e. Absorption; capitalised overheads are released to profit during the year

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 20MC: Product costs under variable costing are typically: A. higher than under absorption costing B. lower...

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Similar questions

Product costs under variable costing are typically: A. higher than under absorption costing B. lower than under absorption costing C. the same as with absorption costing D. higher than absorption costing when inventory increases
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.
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.
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
During a period of rising inventory costs and stable output prices, describe how net income and total assets would differ depending upon whether LIFO or FIFO is applied. Explain how your answer would change if the company is experiencing declining inventory costs and stable output prices.
It’s common in the electronics industry for unit costs of raw materials inventories to decline over time. In this environment, explain the difference between LIFO and FIFO, in terms of the effect on income and financial position. Assume that inventory quantities remain the same for the period.
Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.
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.
CVP analysis makes all of the following assumptions except a change in volume is the only factor that affects costs. revenues are linear throughout the relevant range. the mix of products will not change. inventory levels will increase.
Under variable costing, which of the following costs are assigned to inventory? Variable Selling & Administrative Costs variable Factory Overhead Costs (A) Yes No b)No yes c)Yes Yes d) No No 8.Which of the following would appear on both the budgeted income statement and on the schedule of expected cash disbursements for operating expenses? (A) Depreciation expense (B) Rent expense (C) Sales commission expense (D) Both B and C 9.Which of the following is not an underlying assumption of the cost-volume-profit graph? (A) Expenses are categorized into fixed and variable (B) Revenues and expenses are linear over the relevant range (C) Efficiency and productivity will be unchanged (D) Sales mix will not be…