NEW MyLab Accounting with Pearson eText -- Access Card -- for Financial Accounting
10th Edition
ISBN: 9780133437287
Author: Walter T. Harrison Jr., Charles T. Horngren, C. William Thomas
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem 9.6Q
The main trouble with variable costing is that it ignores the increasing importance of fixed costs in manufacturing companies. Do you agree? Why?
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Students have asked these similar questions
Which of the following types of companies would be most likely to benefit from activity-based costing?
A. Companies with a low potential for cost distortions
B. Companies that have a large proportion of unit-level costs
C. Companies that have relatively high proportion of overhead compared to direct materials and direct labor
D. None of the above
Under variable costing, how is it possible to increase net operating income without increasing sales?
Which among the following is not true about traditional costing system?
a.
This method allocates greater proportion of overheads to high volume products
b.
This method avoids the phenomenon of product cost cross subsidization
c.
This method allocates smaller proportion of overheads to low volume products
d.
This method leads to cost smoothing
Chapter 9 Solutions
NEW MyLab Accounting with Pearson eText -- Access Card -- for Financial 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 - Prob. 9.16ECh. 9 - Prob. 9.17ECh. 9 - Prob. 9.18ECh. 9 - Prob. 9.19ECh. 9 - Prob. 9.20ECh. 9 - Prob. 9.21ECh. 9 - Prob. 9.22ECh. 9 - Prob. 9.23ECh. 9 - Capacity management, denominator-level capacity...Ch. 9 - Prob. 9.25ECh. 9 - Prob. 9.26ECh. 9 - Prob. 9.27ECh. 9 - Prob. 9.28PCh. 9 - Prob. 9.29PCh. 9 - Prob. 9.30PCh. 9 - Prob. 9.31PCh. 9 - Motivational considerations in denominator-level...Ch. 9 - Prob. 9.33PCh. 9 - Prob. 9.34PCh. 9 - Prob. 9.35PCh. 9 - Prob. 9.36PCh. 9 - Prob. 9.37PCh. 9 - Prob. 9.38PCh. 9 - Prob. 9.39PCh. 9 - Prob. 9.40PCh. 9 - Prob. 9.41PCh. 9 - Prob. 9.42P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Explain why service companies use different activity bases than manufacturing companies to classify costs as fixed or variable.arrow_forwardWhen operating in a constrained environment, which products should be produced? A. products with the highest contribution margin per unit B. products with the highest contribution margin per unit of the constrained process C. products with the highest selling price D. products with the lowest allocated joint costarrow_forwardWhy would managers prefer variable costing over absorption costing?arrow_forward
- Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.arrow_forwardWhich of the following statements is true for a firm that uses variable costing? A. The cost of a unit of product changes because of changes in number of units manufactured.B. Profits fluctuate with sales.C. An idle facility variation is calculated.D. Product costs include variable administrative costs.arrow_forwardDo you agree with the following statements? Check only those with which you agree. Check All That Apply The chief benefit of Variable Costing is that it removes the fluctuations in the computation of net operating income that are caused when production and sales numbers do not match during the year.The chief benefit of Variable Costing is that it removes the fluctuations in the computation of net operating income that are caused when production and sales numbers do not match during the year. Absorption Costing is more useful for internal, managerial decision making.Absorption Costing is more useful for internal, managerial decision making. Variable costing is more accurate than absorption costing in presenting the accrual-based financial statements.Variable costing is more accurate than absorption costing in presenting the accrual-based financial statements.arrow_forward
- What is the basic difference between variable costing and absorption costing?a. Variable costing always produces less taxable income that absorption costing.b. Variable costing recognizes fixed costs as a period cost and absorption costingrecognizes fixed costs as a product cost.c. Variable costing cannot use standards, whereas standards may be used with absorptioncosting.d. Variable costing may be used only in situations where production is essentiallyhomogenous, but absorption costing may be used under any manufacturing condition.arrow_forwardWhat is the basic difference between absorption costing and variable costing? What are the arguments in favor of treating fixed manufacturing overhead costs as product costs? What are the arguments in favor of treating fixed manufacturing overhead costs as period costs?arrow_forwardDo you think that the pandemic and shortages could cause some companies to decide to use a different method of costing? If so, why?arrow_forward
- Would the pandemic and shortages could cause some companies to decide to use a different method of costing? If so, why and what method would they use?arrow_forwardWhen making outsourcing decisions, which of the following is true? The expected use of the freed capacity is irrelevant. The variable cost of producing the product in-house is relevant. The total manufacturing unit cost of making the product in-house is relevant. Avoidable fixed costs are irrelevant.arrow_forwardWhat are the differences between a company using absorption costing and variable costing when they give managers a bonus for meeting an annual income target?arrow_forward
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