Question

30. The cost-volume-profit analysis works when the company uses the system of:

to. Full costing (absorption costing)

b. Variable costing (variable costing)

c. Activity-Based Costing (ABC)

d. All of the above.

31. What is the difference between “Absorption costing”, “Variable costing” and “Throughput costing”?

to. Under Variable costing, manufacturing fixed costs are NOT inventoried

b. Under Throughput costing, only direct raw material costs are inventoried

c. Both "a" and "b" are correct

d. Neither "a" nor "b" are correct

32. If a manufacturing company does NOT have inventories, the difference between the operating income under absorption costing and the operating income under variable costing will be:

to. equal to the variable overhead that the company incurred.

b. equal to the fixed overhead that the company incurred

c. equal to the sum of fixed overhead and incurred variable overhead

d. neither, both amounts will be equal

33. For the purposes of financial statements prepared under generally accepted accounting standards (GAAP), companies:

to. They should use absorption costing

b. They should use variable costing

c. they can use variable costing, but most companies use absorption costing

d. can use absorption costing, but most companies use variable costing

Answer 1

Question 30

Answer : b .Variable costing (variable costing)

Explanation : under variable cositng the cost - volume- profit analysis works as it find the

impact of cost and volume on the profit.

Question 31

Answer : C .Both "a " and "b" are correct  

Expanation : under variable costing only the variable cost is considered for inventoried

and under the throughput costing, only the material cost is considered true variable cost and other as period cost which charged in the period in which it incurred. so only direct material cost are inventoriable cost

Question 32

Answer : d .neither, both amount will be equal

Explanation : the difference between the absoption costing and variable cositng are due the inventory , if there is no inventory than there is not difference in the operating income in both the method .

Question 33

Answer : a. They should use absorption costing.

Explanation : under the GAAP required to prepare under absorption cositn for the external reproting purpose. External report is used by the public at large and the shareholhers will interact with the external report and external report will present the health of the company and attract the more investment in the company.