Managerial Accounting: Variable Costing (Ch.5)

What is the key difference between Full (Absorption) and Variable Costing?

• Full Costing treats Manufacturing Overhead as a period cost

• Variable Costing treats Fixed Manufacturing Overhead as a period cost

• Absorption Costing only considers variable costs to calculate net income

• Variable Costing only considers variable costs to calculate net income

Which scenario results in the Net Income under Full Costing to be equal to the Net Income under Variable Costing?

• Quantity Produced is equal to Quantity Sold

• Quantity Produced is greater than Quantity Sold

• Quantity Produced is less than Quantity Sold

Which of the three scenarios shows Net Income under Full Costing to be greater than the Net Income under Variable Costing

• Quantity Produced is equal to Quantity Sold

• Quantity Produced is greater than Quantity Sold

• Quantity Produced is less than Quantity Sold

When is Net Income under Absorption Costing less than Net Income under Variable Costing?

• Quantity Produced is equal to Quantity Sold

• Quantity Produced is greater than Quantity Sold

• Quantity Produced is less than Quantity Sold

If Quantity Produced is less than Quantity Sold, which of the following statements must be true?

• There must have been some Beginning Inventory at the start of the period

• There must have been some amount remaining in Ending Inventory at the end of the period

• The company cannot have had any Beginning Inventory for this period

• The difference between Net Incomes under Absorption and Variable Costing is fully accounted for by the difference in Ending Inventory

If Quantity Produced is greater than Quantity sold, what can account for the difference in the Net Incomes under the two costing methods.

• The difference in Net Incomes can be accounted for by the differences in Ending Inventory

• The difference in Net Incomes can be accounted for by the differences in Beginning Inventory

• The difference in Net Incomes can be accounted for by the differences in Selling Expenses

• The difference in Net Incomes can be accounted for by the differences in Administrative Expenses

For which scenario does the difference between the Beginning Inventory under Full Costing and the Beginning Inventory under Variable Costing account for the differences in Net Incomes under these methods?

• Quantity Sold is equal to Quantity Produced

• Quantity Sold is greater than Quantity Produced

• Quantity Sold is less than Quantity Produced