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| 1 | |
Direct materials, direct labor, and manufacturing overhead are said to be inventoried costs. |
| | A) | True |
| | B) | False |
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| 2 | |
Absorption costing is a costing method that includes both variable and fixed manufacturing overhead in the product costs that flow through the manufacturing accounts. |
| | A) | True |
| | B) | False |
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| 3 | |
Inventoried costs are the costs of production that are stored in inventory accounts until the inventory is sold. |
| | A) | True |
| | B) | False |
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| 4 | |
Under variable costing, fixed overhead is inventoried until the accounting period in which the manufactured goods are sold. |
| | A) | True |
| | B) | False |
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| 5 | |
Variable costing is a costing method that includes only variable manufacturing overhead in the product cost that flows through the manufacturing accounts. |
| | A) | True |
| | B) | False |
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| 6 | |
An income statement in which the cost of goods manufactured includes the fixed manufacturing overhead incurred during the time period covered by the income statement is called an absorption-costing income statement. |
| | A) | True |
| | B) | False |
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| 7 | |
A variable-costing income statement is one in which all variable costs are deducted from revenues to determine contribution margin from which all fixed manufacturing, fixed administrative, and fixed selling costs are deducted to arrive at net income. |
| | A) | True |
| | B) | False |
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| 8 | |
In a variable-costing income statement, contribution margin is equal to sales revenue less all variable expenses to manufacture the product. |
| | A) | True |
| | B) | False |
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| 9 | |
A year-to-year increase in ending inventories will result in minimal differences in income between absorption-costing and variable-costing income statements. |
| | A) | True |
| | B) | False |
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| 10 | |
The formula above can be used to compute the difference in the amount of fixed overhead expensed in a given time period between absorption costing and variable costing product-costing methods. |
| | A) | True |
| | B) | False |
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| 11 | |
When there is an increase in finished goods inventory, an absorption-costing income statement will report net income in excess of that reported using variable costing. |
| | A) | True |
| | B) | False |
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| 12 | |
The difference in total income between variable costing and absorption costing will be insignificant over a long period of time. |
| | A) | True |
| | B) | False |
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| 13 | |
The discrepancies between the reported net income under absorption costing and variable costing will increase over long time periods. |
| | A) | True |
| | B) | False |
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| 14 | |
The shortcut method of reconciling between an absorption-costing income statement and a variable-costing income statement involves using the formula of: |
| | A) | True |
| | B) | False |
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| 15 | |
An analysis of the components of variable and fixed costs that can used to determine the break-even point in units or dollars is called cost-volume-profit analysis. |
| | A) | True |
| | B) | False |
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| 16 | |
The break-even point can be determined by dividing fixed costs by unit product costs. |
| | A) | True |
| | B) | False |
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| 17 | |
Absorption costing and variable costing are consistent with cost-profit-volume (CVP) analysis. |
| | A) | True |
| | B) | False |
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| 18 | |
Unit contribution margin is equal to the sales price per unit minus the variable costs per unit. |
| | A) | True |
| | B) | False |
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| 19 | |
Variable costing is consistent with CVP analysis. |
| | A) | True |
| | B) | False |
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| 20 | |
Proponents of absorption costing argue that since fixed manufacturing costs comprise part of the cost of production, they have future service potential as a component of the inventory which can be sold in the future to generate revenue. |
| | A) | True |
| | B) | False |
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| 21 | |
Advocates of absorption costing argue that inventory should be valued at its full cost of production. |
| | A) | True |
| | B) | False |
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| 22 | |
Variable-costing income statements are acceptable for external reporting purposes. |
| | A) | True |
| | B) | False |
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| 23 | |
Under just-in-time (JIT) inventory management, inventories are kept very low, and are ordered only when needed so as to arrive in time to be placed into production. |
| | A) | True |
| | B) | False |
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| 24 | |
An asset is a thing of value owned by the organization with future service potential. |
| | A) | True |
| | B) | False |
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| 25 | |
Variable costing is often used for external reporting purposes in order to provide report users with measures of contribution margin. |
| | A) | True |
| | B) | False |
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| 26 | |
Throughput costing assigns only the product-level spending for direct costs as the cost of products or services. |
| | A) | True |
| | B) | False |
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| 27 | |
Advocates of throughput costing argue that classifying any other past or committed cost as a product cost creates an incentive to drive down the average cost per unit simply by manufacturing more units on bottleneck processes. |
| | A) | True |
| | B) | False |
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| 28 | |
Under throughput costing, the incentive for over-production disappears because all non-throughput costs will be expensed as period costs regardless of how many units are produced. |
| | A) | True |
| | B) | False |
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| 29 | |
If direct materials are considered to be the only unit-level cost, the gross margin in a throughput costing income statement would be $1,080,000. |
| | A) | True |
| | B) | False |
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