QUIZ 2 : TOPIC 9 [ABSORPTION COSTING AND MARGINAL COSTING]

What is the difference between Full (Absorption) and Variable (Marginal) 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 Marginal 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 be some Inventory at the beginning of the period

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

• The company cannot have any Beginning Inventory for this period

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

If Quantity Produced is greater than Quantity sold, the difference in the Net Income under the two costing methods are because of :

• the differences in Ending Inventory

• the differences in Beginning Inventory

• the differences in Selling Expenses

• the differences in Administrative Expenses

The different values of inventory reported in an income statement under Absorption costing and marginal costing that shows the net profit of Absorption costing less than net profit of marginal costing when

• Quantity Sold is equal to Quantity Produced

• Quantity Sold is greater than Quantity Produced

• Quantity Sold is less than Quantity Produced

Cost per unit under Marginal Costing is lower than Absorption Costing

• TRUE

• FALSE

Gross Profit can be derived from Marginal Costing

• TRUE

• FALSE

Marginal costing is suitable for external reporting.

• TRUE

• FALSE