Question 1

Using normal costing to cost units of productions, Steven Harper Co.has gathered the following information: Fixed manufacturing overhead was estimated to be $120,000 for the year.
Actual production was 40,000 units.
Actual fixed manufacturing overhead costs incurred were $125,000.
What is the result of this difference between the estimated fixed overhead and actual fixed overhead?

Accepted Answer

A) The difference is expensed as a period cost the way variable costing immediately expenses fixed overhead as a period cost. 
B) The difference is over or under-applied overhead that if immaterial, will be closed out to cost of goods sold at year end. 
C) The difference will be held in inventory and taken to cost of goods sold when the units are sold next year. 
D) There is no difference.

Question 2

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 3

The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 4

In full or absorption costing, all manufacturing costs are charged to the product.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following terms would be found on an Income Statement using variable costing?

Accepted Answer

A) Contribution margin 
B) Variable manufacturing overhead 
C) Fixed manufacturing overhead not included in cost of goods sold 
D) Gross profit

Question 6

Which of the following statements about absorption costing is true?

Accepted Answer

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.

Question 7

Under absorption costing when inventory increases in a year,

Accepted Answer

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.

Question 8

Under absorption costing

Accepted Answer

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.

Exam 8: Alternative Inventory Costing Methods: a Decision-Making Perspective

When units produced exceed units sold, income under absorption costing is higher than income under variable costing.

The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.

In full or absorption costing, all manufacturing costs are charged to the product.

Which of the following terms would be found on an Income Statement using variable costing?

Which of the following statements about absorption costing is true?

Under absorption costing when inventory increases in a year,

Under absorption costing