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1) Which of the following costs is inventoried when using variable costing? A) rent on factory building B) electricity consumed in manufacturing process C) sales commission paid on each sale D) advertising costs incurred for the product Answer: B Diff: 1 Objective: 1 AACSB: Application of knowledge 2) Which of the following costs is inventoried when using absorption costing? A) variable selling costs B) fixed administrative costs C) variable manufacturing costs D) fixed selling costs Answer: C Diff: 1 Objective: 1 AACSB: Analytical thinking 3) ________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded. A) Variable costing B) Mixed costing C) Absorption costing D) Standard costing Answer: A Diff: 1 Objective: 1 AACSB: Analytical thinking 4) ________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs. A) Variable costing B) Mixed costing C) Absorption costing D) Standard costing Answer: C Diff: 2 Objective: 1 AACSB: Analytical thinking 1 Copyright © 2015 Pearson Education When there are no units in the beginning finished goods inventory?When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold, the operating income will be higher under absorption costing than variable costing. In its first year of business, Lakota, Inc. produced 600 units and sold 400 units.
When the number of units sold exceeds the number of units produced income reported under absorption?When the number of units sold exceed the number of units produced, income reported under absorption costing will be lower under absorption than under variable costing.
Why should special order decisions be made using variable costing?Special order decisions should be made using variable costing because: Only variable costs will increase as a result of the special order.
Which of the following costing methods charges all manufacturing costs to its products?Option d. is correct. Absorption costing is one of the methods of calculating the cost of goods produced by the manufacturer. The technique includes both direct and indirect costs.
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Income __________ when there is zero beginning inventory and all inventory units produced are sold.
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