Chapter 7 part 1

Question 1

When using variable costing, fixed manufacturing overhead is

assigned to units of the product and expensed as the units are sold

expensed in the period incurred

never expensed

Answer 1

expensed in the period incurred

Question 2

The difference between reported net income on variable costing and absorption costing income statements is based on how __________.

expenses are organized

the statements are formatted

cost classifications are defined

fixed overhead is accounted for

Answer 2

fixed overhead is accounted for

Question 3

Absorption costing treats fixed manufacturing overhead as a ______ cost.

Answer 3

product

Question 4

Fixed manufacturing overhead costs are included as part of Work in Process inventory under Blank______.

both variable and absorption costing

variable costing only

absorption costing only

neither variable and absorption costing

Answer 4

absorption costing only