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The one primary difference between variable and absorption costing is that under a. variable costing, companies charge the fixed manufacturing overhead as an expense in the current period. b. absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period. c. variable costing, companies charge the variable manufacturing overhead as an expense in the current period. d. absorption costing, companies charge the variable manufacturing overhead as an expense in the current period. a112. Net income under absorption costing is higher than net income under variable costing a. when units produced exceed units sold. b. when units produced equal units sold. c. when units produced are less than units sold. d. regardless of the relationship between units produced and units sold. a113. Some fixed manufacturing overhead costs of the current period are deferred to future periods under a. absorption costing. b. variable costing. c. both absorption and variable costing. d. neither absorption nor variable costing. a114. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under absorption costing for 2013 is a. $6,400. b. $11,200. c. $12,800. d. $17,600. a115. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under absorption costing for 2014 is a. $26,400. b. $31,200. c. $32,800. d. $37,600. a116. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under variable costing for 2013 is a. $6,400. b. $11,200. c. $12,800. d. $17,600. a 117. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under variable costing for 2014 is a. $26,400. b. $31,200. c. $32,800. d. $37,600. a118. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. For the three years 2012–2014, a. absorption costing income exceeds variable costing income by $8,000. b. absorption costing income equals variable costing income. c. variable costing income exceeds absorption costing income by $8,000. d. absorption costing income may be greater than, equal to, or less than variable costing income, depending on the situation. a119. When production exceeds sales, a. some fixed manufacturing overhead costs are deferred until a future period under absorption costing. b. some fixed manufacturing overhead costs are deferred until a future period under variable costing. c. variable and fixed manufacturing overhead costs are deferred until a future period under absorption costing. b. variable and fixed manufacturing overhead costs are deferred until a future period under variable costing. a120. When production exceeds sales, a. ending inventory under variable costing will exceed ending inventory under absorption costing. b. ending inventory under absorption costing will exceed ending inventory under variable costing. c. ending inventory under absorption costing will be equal to ending inventory under variable costing. d. ending inventory under absorption costing may exceed, be equal to, or be less than ending inventory under variable costing. a121. Management may be tempted to overproducewhen using a. variable costing, in order to increase net income. b. variable costing, in order to decrease net income. c. absorption costing, in order to increase net income. d. absorption costing, in order to decrease net income. a122. If a division manager’s compensation is based upon the division’s net income, the manager may decide to meet the net income targets by increasing productionwhen using a. variable costing, in order to increase net income. b. variable costing, in order to decrease net income. c. absorption costing, in order to increase net income. d. absorption costing, in order to decrease net income. a123. Expected sales for next year for the Beresford Company is 150,000 units. Curt Planters, manager of the Beresford Division, is under pressure to improve the performance of the Division. As he plans for next year, he has to decide whether to produce 150,000 units or 180,000 units. The Beresford Company will have higher net income if Curt Planters decides to produce a. 180,000 units if income is measured under absorption costing. b. 180,000 units if income is measured under variable costing. c. 150,000 units if income is measured under absorption costing. d. 150,000 units if income is measured under variable costing. a124. Which of the following is a potential advantage of variable costing relative to absorption costing? a. Net income is affected by changes in production levels. b. The use of variable costing is consistent with cost-volume-profit analysis. c. Net income computed under variable costing is not closely tied to changes in sales levels. d. More than one of the above. a125. Companies that use just-in-time processing techniques will a. have greater differences between absorption and variable costing net income. b. have smaller differences between absorption and variable costing net income. c. not be able to use absorption costing. d. not be able to use variable costing.

The one primary difference between variable and absorption costing is that under

a. variable costing, companies charge the fixed manufacturing overhead as an expense in the current period.

b. absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period.

c. variable costing, companies charge the variable manufacturing overhead as an expense in the current period.

d. absorption costing, companies charge the variable manufacturing overhead as an expense in the current period.

a112. Net income under absorption costing is higher than net income under variable costing

a. when units produced exceed units sold.

b. when units produced equal units sold.

c. when units produced are less than units sold.

d. regardless of the relationship between units produced and units sold.

a113. Some fixed manufacturing overhead costs of the current period are deferred to future periods under

a. absorption costing.

b. variable costing.

c. both absorption and variable costing.

d. neither absorption nor variable costing.

a114. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under absorption costing for 2013 is

a. $6,400.

b. $11,200.

c. $12,800.

d. $17,600.

 

a115. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under absorption costing for 2014 is

a. $26,400.

b. $31,200.

c. $32,800.

d. $37,600.

a116. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under variable costing for 2013 is

a. $6,400.

b. $11,200.

c. $12,800.

d. $17,600.

a 117. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. Income under variable costing for 2014 is

a. $26,400.

b. $31,200.

c. $32,800.

d. $37,600.

a118. Nielson Corp. sells its product for $8,800 per unit. Variable costs per unit are: manufacturing, $4,800, and selling and administrative, $100. Fixed costs are: $24,000 manufacturing overhead, and $32,000 selling and administrative. There was no beginning inventory at 1/1/12. Production was 20 units per year in 2012 –2014. Sales was 20 units in 2012, 16 units in 2013, and 24 units in 2014. For the three years 2012–2014,

a. absorption costing income exceeds variable costing income by $8,000.

b. absorption costing income equals variable costing income.

c. variable costing income exceeds absorption costing income by $8,000.

d. absorption costing income may be greater than, equal to, or less than variable costing income, depending on the situation.

 

a119. When production exceeds sales,

a. some fixed manufacturing overhead costs are deferred until a future period under absorption costing.

b. some fixed manufacturing overhead costs are deferred until a future period under variable costing.

c. variable and fixed manufacturing overhead costs are deferred until a future period under absorption costing.

b. variable and fixed manufacturing overhead costs are deferred until a future period under variable costing.

a120. When production exceeds sales,

a. ending inventory under variable costing will exceed ending inventory under absorption costing.

b. ending inventory under absorption costing will exceed ending inventory under variable costing.

c. ending inventory under absorption costing will be equal to ending inventory under variable costing.

d. ending inventory under absorption costing may exceed, be equal to, or be less than ending inventory under variable costing.

a121. Management may be tempted to overproducewhen using

a. variable costing, in order to increase net income.

b. variable costing, in order to decrease net income.

c. absorption costing, in order to increase net income.

d. absorption costing, in order to decrease net income.

a122. If a division manager’s compensation is based upon the division’s net income, the manager may decide to meet the net income targets by increasing productionwhen using

a. variable costing, in order to increase net income.

b. variable costing, in order to decrease net income.

c. absorption costing, in order to increase net income.

d. absorption costing, in order to decrease net income.

a123. Expected sales for next year for the Beresford Company is 150,000 units. Curt Planters, manager of the Beresford Division, is under pressure to improve the performance of the Division. As he plans for next year, he has to decide whether to produce 150,000 units or 180,000 units. The Beresford Company will have higher net income if Curt Planters decides to produce

a. 180,000 units if income is measured under absorption costing.

b. 180,000 units if income is measured under variable costing.

c. 150,000 units if income is measured under absorption costing.

d. 150,000 units if income is measured under variable costing.

 

a124. Which of the following is a potential advantage of variable costing relative to absorption costing?

a. Net income is affected by changes in production levels.

b. The use of variable costing is consistent with cost-volume-profit analysis.

c. Net income computed under variable costing is not closely tied to changes in sales levels.

d. More than one of the above.

a125. Companies that use just-in-time processing techniques will

a. have greater differences between absorption and variable costing net income.

b. have smaller differences between absorption and variable costing net income.

c. not be able to use absorption costing.

d. not be able to use variable costing.

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