quiz 6

Question 1

When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will:

Answer 1

remain constant.

Question 2

Net operating income computed under variable costing would exceed net operating income computed using absorption costing if:

a. Units sold are less than units produced

b. Units sold equal units produced

c. Units sold exceed units produced

d. The average fixed cost per unit is zero

Answer 2

c. Units sold exceed units produced

Question 3

A cost that would be included in product costs under both absorption costing and variable costing is:

Answer 3

variable manufacturing costs.

Question 4

Which of the following is true of a company that uses absorption costing?

Answer 4

Unit product costs can change as a result of changes in the number of units manufactured.

Question 5

Allocating common fixed expenses to business segments:

A) may cause managers to erroneously discontinue business segments

B) ensures that all costs are covered

C) may cause managers to erroneously keep business segments that should be dropped.

D) helps managers make good decisions

Answer 5

A) may cause managers to erroneously discontinue business segments

WE DO NOT ALLOCATE COMMON COSTS TO SEGMENTS