chapter 8 assignment questions

Question 1

Some fixed manufacturing costs of the current period are deferred to future periods through ending inventory under variable costing.

True

False

Answer 1

False

Question 2

If normal costing is used when preparing an absorption costing income statement, the fixed manufacturing overhead assigned to inventory is based on a predetermined fixed manufacturing overhead rate.

True

False

Answer 2

True

Question 3

Accounting for fixed manufacturing overhead is the only difference between variable and absorption costing

True

False

Answer 3

True

Question 4

Under absorption costing, the value of a unit of a product includes all product costs

True

False

Answer 4

True

Question 5

The use of variable costing is consistent with cost-volume-profit analysis

True

False

Answer 5

True

Question 6

Variable costing is the approach used for external reporting under generally accepted accounting principles

True

False

Answer 6

False

Question 7

Net income under variable costing is unaffected by changes in production levels

True

False

Answer 7

True

Question 8

Throughput costing is also called super absorption costing.

True

False

Answer 8

False

Question 9

When comparing absorption and variable costing which of the following is false?

a) The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.
b) Selling and administrative costs are period costs under both absorption and variable costing.
c) Companies that use just-in-time processing techniques will have significant differences between absorption and variable-costing net income.
d) Absorption costing will show a higher net income than variable costing whenever there are more units produced than sold.

Answer 9

c) Companies that use just-in-time processing techniques will have significant differences between absorption and variable-costing net income.kj

Question 10

How are fixed manufacturing costs handled under variable costing?

a) They are subtracted from the variable cost of goods sold to determine the ending inventory value that will be recorded on the Balance Sheet.
b) They are not recorded, which is why variable costing is not used for external reporting.
c) They are recorded directly on the Balance Sheet.
d) They are treated as period costs.

Answer 10

d) They are treated as period costs.

Question 11

When production exceeds sales

a) ending inventory under variable costing will exceed ending inventory under absorption costing.
b) 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 may either exceed, be equal to, or be less than ending inventory under variable costing.

Answer 11

b) ending inventory under absorption costing will exceed ending inventory under variable costing.

Question 12

Which of the following statements about variable costing is true?

a) As manufacturing output increases, the per-unit manufacturing cost remains constant.
b) As manufacturing output increases, the per-unit manufacturing cost decreases.
c) As manufacturing output increases, the per-unit manufacturing cost increases.
d) As manufacturing output increases, the change in the per-unit manufacturing cost is negated by the change in the per-unit selling cost.

Answer 12

a) As manufacturing output increases, the per-unit manufacturing cost remains constant.

Question 13

When absorption costing is used

a) for external reporting, variable costing can still be used for internal reporting purposes.
b) management may be tempted to overproduce in a given period in order to decrease net income.
c) it facilitates cost-volume-profit analysis.
d) and production exceeds sales, absorption costing reports a lower net income than variable costing.

Answer 13

a) for external reporting, variable costing can still be used for internal reporting purposes.

Question 14

Under absorption costing

a) selling and administration overhead costs are inventoried.
b) selling and administration overhead costs are expensed as incurred.
c) only variable selling and administration costs are expensed while fixed selling and administration costs are inventoried.
d) only fixed selling and administration costs are expensed while variable selling and administration costs are inventoried.

Answer 14

b) selling and administration overhead costs are expensed as incurred.

Question 15

Which of the following terms would be found on an income statement using absorption costing but not on an income statement prepared using variable costing?

a) Contribution margin
b) Variable manufacturing overhead
c) Fixed manufacturing overhead
d) Gross profit

Answer 15

d) Gross profit

Question 16

When production is greater than sales

a) net income under absorption costing will be greater than or less than net income under variable costing depending on the selling and administration costs.
b) net income under absorption costing will be equal to net income under variable costing.
c) net income under absorption costing will be less than net income under variable costing.
d) net income under absorption costing will be greater than net income under variable costing.

Answer 16

d) net income under absorption costing will be greater than net income under variable costing.

Question 17

In income statements prepared under absorption costing and variable costing, where would you find the term contribution margin?

a) In absorption-costing income statement
b) In absorption-costing income statement
c) In variable-costing income statement
d) In both income statements

Answer 17

c) In variable-costing income statement

Question 18

In income statements prepared under absorption costing and variable costing, where would you find the term gross profit?

a) In variable-costing income statement
b) In both income statements
c) In absorption-costing income statement
d) In variable-costing income statement

Answer 18

c) In absorption-costing income statement

Question 19

Under absorption costing when inventory increases in a year,

a) there are more fixed costs charged to income.
b) there are less fixed costs charged to income.
c) fixed costs in inventory remain the same regardless of inventory changes.
d) fixed costs in inventory are reduced.

Answer 19

b) there are less fixed costs charged to income.

Question 20

Under GAAP,

a) absorption costing is required to be used for the costing of inventory for external reporting purposes.
b) net income highlights differences between variable and fixed costs.
c) measured net income is often used externally to evaluate performance, justify cost increases, or evaluate new projects.
d) measured net income is often used internally to evaluate performance, justify cost increases or evaluate new projects.

Answer 20

a) absorption costing is required to be used for the costing of inventory for external reporting purposes.

Question 21

Which of the following is not a potential advantage of variable costing relative to absorption costing?

a) Net income calculated under variable costing is unaffected by changes in production levels.
b) It is easier to understand the impact of fixed and variable costs on the computation of net income when variable costing is used.
c) The use of variable costing is consistent with cost-volume-profit analysis.
d) Net income calculated under variable costing is not closely tied to changes in sales levels.

Answer 21

d) Net income calculated under variable costing is not closely tied to changes in sales levels.

Question 22

Choose the answer that is false regarding throughput costing.

a) Throughput costing treats all costs as period costs except direct labour.
b) Throughput costing treats all costs as period costs except direct materials.
c) Throughput costing is also known as super-variable costing for its close relationship to variable costing.
d) Assembly line and continuously automated companies are most likely to choose this method of costing than other companies.

Answer 22

a) Throughput costing treats all costs as period costs except direct labour.

Question 23

A major conceptual difference between throughput costing and variable costing is

a) under variable costing, direct labour and variable manufacturing overhead are charged to income as period expenses.
b) under throughput costing, direct labour and variable manufacturing overhead are deferred in inventory rather than charged to income as period expenses.
c) under throughput costing, direct labour and variable manufacturing overhead are charged to income as period expenses.
d) there are no conceptual differences between the two methods

Answer 23

c) under throughput costing, direct labour and variable manufacturing overhead are charged to income as period expenses.

Question 24

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Commission fees for salespersons

Answer 24

period cost

Question 25

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Glue for wooden chairs—variable

Answer 25

product cost

Question 26

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Fabric for T-shirts

Answer 26

product cost

Question 27

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Labour costs for producing TVs

Answer 27

product cost

Question 28

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Factory rent expense—fixed

Answer 28

period cost

Question 29

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Factory utility costs—variable

Answer 29

product cost

Question 30

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Car mileage for salespersons

Answer 30

period cost

Question 31

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Administrative expenses—fixed

Answer 31

period cost

Question 32

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Administrative Internet connection fees

Answer 32

period cost

Question 33

Determine whether the following cost would be classified as product costs or period costs under a variable-costing system:

Wages—assembly line

Answer 33

product cost

Question 34

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Commission fees for salespersons

Answer 34

period cost

Question 35

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Glue for wooden chairs—variable

Answer 35

period cost

Question 36

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Fabric for T-shirts

Answer 36

product cost

Question 37

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Labour costs for producing TVs

Answer 37

period cost

Question 38

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Factory rent expense—fixed

Answer 38

period cost

Question 39

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Factory utility costs—variable

Answer 39

period cost

Question 40

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Car mileage for salespersons

Answer 40

period cost

Question 41

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Administrative expenses—fixed

Answer 41

period cost

Question 42

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Administrative Internet connection fees

Answer 42

period cost

Question 43

Determine whether each of the following costs would be classified as product costs or period costs under a throughput-costing system.

Wages—assembly line

Answer 43

period cost