HORGREN'S COST ACCOUNTING
LATEST Edition
ISBN: 9781323676714
Author: Datar
Publisher: PEARSON EDUCATION (COLLEGE)
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Textbook Question
Chapter 9, Problem 9.16MCQ
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.
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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.
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.
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
Chapter 9 Solutions
HORGREN'S COST ACCOUNTING
Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...
Ch. 9 - Prob. 9.11QCh. 9 - Describe the downward demand spiral and its...Ch. 9 - Will the financial statements of a company always...Ch. 9 - Prob. 9.14QCh. 9 - The difference between practical capacity and...Ch. 9 - In comparing the absorption and variable cost...Ch. 9 - Queen Sales, Inc. has just completed its first...Ch. 9 - King Tooling has produced and sold the following...Ch. 9 - The following information relates to Drexler Inc.s...Ch. 9 - Prob. 9.20MCQCh. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-21). The...Ch. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-23). The...Ch. 9 - Variable versus absorption costing. The Tomlinson...Ch. 9 - Absorption and variable costing. (CMA) Miami,...Ch. 9 - Absorption versus variable costing. Horace Company...Ch. 9 - Candyland uses standard costing to produce a...Ch. 9 - Capacity management, denominator-level capacity...Ch. 9 - Denominator-level problem. Thunder Bolt Inc., is a...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Variable costing versus absorption costing. The...Ch. 9 - Throughput Costing (continuation of 9-32) 1....Ch. 9 - Variable costing and absorption costing, the Z-Var...Ch. 9 - Comparison of variable costing and absorption...Ch. 9 - Effects of differing production levels on...Ch. 9 - Alternative denominator-level capacity concepts,...Ch. 9 - Motivational considerations in denominator-level...Ch. 9 - Denominator-level choices, changes in inventory...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Downward demand spiral. Market.com is about to...Ch. 9 - Absorption costing and production-volume...Ch. 9 - Operating income effects of denominator-level...Ch. 9 - Variable and absorption costing, actual costing....Ch. 9 - Prob. 9.45PCh. 9 - Cost allocation, responsibility accounting, ethics...Ch. 9 - Absorption, variable, and throughput costing....Ch. 9 - Costing methods and variances, comprehensive. Rob...
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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?arrow_forwardUsing the information for Lighthizer Trading Company, prepare the income statement to include all costs, but separate out uncontrollable costs. Insert subtotals where appropriate (include one for operating income) before the uncontrollable costs. Income tax expense should be based on all expenses (that is, it will be the same amount as in the previous exercise). Calculate net income, profit margin, ROI, and RI excluding uncontrollable expenses. Prepare a short response to accompany the income statement that explains why uncontrollable costs are separated in the income statement.arrow_forwardFirst: The inventory value shown on the balance sheet is generally higher under absorption costing than under variable costing. Second: Under variable costing, inventoriable product costs consist of direct materials, direct labor, variable manufacturing overhead and variable selling and administration expenses. * a. Both statements are true b. Only the first statement is true c. Only the second statement is true d. Both statements are falsearrow_forward
- 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.arrow_forwardWhich 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.arrow_forwardUnder 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…arrow_forward
- 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.arrow_forwardWhich of the following statement is correct? A In a variable costing income statement, sales revenue is typically higher than in absorption costing income statement. B When production is not equal to sales, income under absorption costing differs from income under variable costing due to the difference in treatment ( product cost and period cost) of the fixed overhead cost under the two costing methods. C In variable costing system, fixed overhead cost is included as part of the cost of inventory. D In an absorption costing system, fixed overhead cost is treated as a period cost.arrow_forwardFirst: 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 falsearrow_forward
- 1.) Variable selling expenses are a. Product costs under variable costing but period costs under absorptions costingb. Period costs under variable costing but product cost under absorption costingc. Product costs under both costing methodsd. period costs under both costing methods 2.) When production is greater than sales, fixed manufacturing overhead costs are a. Deferred in inventory under variable costingb. Deferred in inventory under absorption costingc. Released from inventory under variable costingd. Released from inventory under absorption costingarrow_forwardWhy 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.arrow_forwardWhen production exceeds sales,a. Ending inventory under variable costing will exceed ending inventory under absorption costingb. Ending inventory under absorption costing will exceed ending inventory under variable costing.c. Ending inventory under absorption costing will be equal to ending inventory under variable costing.d. Ending inventory under absorption costing either exceeds, be equal to, or be less 20 than ending inventory under variable costing.arrow_forward
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