Acct 432 -CH8

Product cost under absorption costing is characteristically: A) Higher than under variable costing. B) Lower than under variable costing. C) Equal to variable costing. D) Higher sometimes and lower sometimes than variable costing.

A) Higher than under variable costing.

When production is equal to sales, which of the following is true? A) No change occurs to inventories for either absorption costing or variable costing methods. B) The use of absorption costing produces a higher net income than the use of variable costing. C) The use of absorption costing produces a lower net income than the use of variable costing. D) The use of absorption costing causes inventory value to increase more than they would through the use of variable costing.

A) No change occurs to inventories for either absorption costing or variable costing methods.

When using throughput costing, which of the following is assigned for direct costs as the cost of products or services? A) Only unit-level spending B) Only facility-level spending C) Both unit-level and facility-level spending D) Only product-sustaining-level spending E) Only batch-level spending

A) Only unit-level spending

Which of the following statements is (are) true? A) Net operating income is not affected by changes in production under absorption costing. B) Net operating income is not affected by changes in production under variable costing. C) Both of the above statements are true. D) Neither of the above statements is true.

B) Net operating income is not affected by changes in production under variable costing.

Which product-costing system treats fixed manufacturing costs as period costs? A) Absorption-costing B) Variable-costing C) Production-costing D) Activity-based costing E) Throughput-costing

B) Variable-costing

Which of the following statements is false? A) Variable-costing highlights the separation of fixed and variable costs. B) Variable and absorption costing income statements show fixed selling expenses as a lump sum. C) Absorption costing is consistent with CVP analysis. D) Under absorption costing, fixed manufacturing overhead is applied to products on a per unit basis. E) Most managers prefer to use the absorption-costing data for cost-based pricing decisions.

C) Absorption costing is consistent with CVP analysis.

Which of the following is an analysis of the components of variable and fixed costs that can be used to determine the break-even point in units or dollars? A) Comparative statement analysis. B) Variance analysis. C) Cost-volume-profit analysis. D) Horizontal analysis. E) None of the above

C) Cost-volume-profit analysis.

Using variable costing, a unit of product includes which costs? A) Only direct materials and direct labor. B) Direct materials, direct labor, and fixed overhead. C) Direct materials, direct labor, and variable overhead. D) Direct materials, direct labor, variable overhead, and fixed overhead Feedback:

C) Direct materials, direct labor, and variable overhead.

A segment of a business responsible for both revenues and expenses would be referred to as: A) a cost center. B) an investment center. C) a profit center. D) residual income.

C) a profit center.

Variable costing is also known as: A) Direct costing. B) Indirect costing. C) Marginal costing. D) Both (A) and (C).

D) Both (A) and (C).

Using absorption costing, a unit of product includes what costs? A) Direct materials and direct labor. B) Direct materials, direct labor, and fixed overhead. C) Direct materials, direct labor, and variable overhead. D) Direct materials, direct labor, variable overhead, and fixed overhead.

D) Direct materials, direct labor, variable overhead, and fixed overhead.

Which of the following would not be considered an inventoriable product cost under a variable costing approach to product costing? A) Direct Materials B) Direct Labor C) Indirect Materials D) Factory Rent E) All of the above would be considered an inventoriable product cost.

D) Factory Rent

Under which of the following will the differences between reported operating income on an absorption-costing income statement and on a variable-costing income statement be insignificant (or minimal) when unit production exceeds unit sales? A) FIFO (first-in, first-out) inventory B) LIFO (last-in, first-out) inventory C) Average inventory D) Just-in-time (JIT) inventory management E) Both (B) and (D)

D) Just-in-time (JIT) inventory management

Variable costing is attractive to managers as an alternative to absorption costing because: A) Absorption costing makes distinctions between fixed and variable product costs. B) Absorption costing is well suited to CVP analysis techniques. C) Absorption costing provides useful tools to managers for planning and control. D) To generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing.

D) To generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing.

Which of the following would not be considered an inventoriable product cost under an absorption costing approach to product costing? A) Factory Supervisor Salary B) Direct Labor C) Indirect Materials D) Direct Materials E) All of the above would be considered an inventoriable product cost.

E) All of the above would be considered an inventoriable product cost.