Question
In: Accounting
Absorption Costing treats all manufacturing costs and selling costs as product costs, regardless of whether they...
Absorption Costing treats all manufacturing costs and selling costs as product costs, regardless of whether they are fixed or variable. T/F
When units produced = units sold, Absorption costing net operating income < Variable costing net operating income. T/F
When determining the units to which costs will be assigned in Equivalent Units, the beginning WIP units + units started into production = units completed and transferred out + ending WIP units. T/F
When calculating Equivalent units, Conversion costs include Direct Labor and Manufacturing Overhead. T/F
Solutions
Expert Solution
| Number | Transaction | True / False |
| 1 | Absorption Costing treats all manufacturing costs and selling costs as product costs, regardless of whether they are fixed or variable | False |
| In Absorption costing only manufacturing cost is treated as product cost wheter fixed or variable | ||
| 2 | When units produced = units sold, Absorption costing net operating income < Variable costing net operating income. | False |
| When units produced = unit sold than net income under both the method is the same | ||
| 3 | When determining the units to which costs will be assigned in Equivalent Units, the beginning WIP units + units started into production = units completed and transferred out + ending WIP units. | False |
| 4 | When calculating Equivalent units, Conversion costs include Direct Labor and Manufacturing Overhead. T/F | True |
ekkarill92 answered 1 year agoRelated Solutions
Absorption costing (also called the full cost method) treats all costs of production as product costs,...
Absorption costing (also called the full cost method) treats all
costs of production as product costs, regardless of whether they
are variable or fixed. Since no distinction is made between
variable and fixed costs, absorption costing is not well suited for
CVP computations. Under absorption costing, the cost of a unit of
product consists of direct materials, direct labor, and both
variable and fixed overhead. Variable and fixed selling and
administrative expenses are treated as period costs and are
deducted...
Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are...
Absorption Statement
Absorption costing does not distinguish between variable and
fixed costs. All manufacturing costs are included in the cost of
goods sold.
Saxon, Inc.
Absorption Costing Income Statement
For the Year Ended December 31
Sales
$1,200,000
Cost of goods sold:
Cost of goods manufactured
$800,000
Ending inventory
(200,000)
Total cost of goods sold
(600,000)
Gross profit
$600,000
Selling and administrative expenses
(290,000)
Operating income
$310,000
Variable Statement
Under variable costing, the cost of goods manufactured includes
only variable manufacturing...
Absorption Statement Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are...
Absorption Statement
Absorption costing does not distinguish between variable and
fixed costs. All manufacturing costs are included in the cost of
goods sold.
Saxon, Inc.
Absorption Costing Income Statement
For the Year Ended December 31
Sales
$1,200,000
Cost of goods sold:
Cost of goods manufactured
$800,000
Ending inventory
(200,000)
Total cost of goods sold
(600,000)
Gross profit
$600,000
Selling and administrative expenses
(290,000)
Operating income
$310,000
Variable Statement
Under variable costing, the cost of goods manufactured includes
only variable manufacturing...
1. Variable Costing & Absorption Costing Selling price per unit is $50 Manufacturing costs include DM...
1. Variable Costing & Absorption Costing
Selling price per unit is $50
Manufacturing costs include DM $11 per
unit, DL $6 per unit, VMOH $3 per unit, Fixed MOH $120,000 per
year.
Selling and administrative costs
include $4 per unit and fixed costs of $70,000 per year.
Produced 10,000 units; sold 6,000
units.
Calculate unit product cost using
variable costing.
Calculate unit product cost using
absorption costing.
Which method will produce the highest
net income?
2. CVP Analysis
Backpacks...
Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in...
Absorption costing does not distinguish between variable and
fixed costs. All manufacturing costs are included in the cost of
goods sold.
Saxon, Inc.
Absorption Costing Income Statement
For the Year Ended December 31
1
Sales
$1,200,000.00
2
Cost of goods sold:
3
Beginning inventory
$0.00
4
Cost of goods manufactured
800,000.00
5
Ending inventory
(160,000.00)
6
Total cost of goods sold
640,000.00
7
Gross profit
$560,000.00
8
Selling and administrative expenses
289,000.00
9
Income from operations
$271,000.00
Under variable costing,...
Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in...
Absorption costing does not distinguish between variable and
fixed costs. All manufacturing costs are included in the cost of
goods sold.
Saxon, Inc.
Absorption Costing Income Statement
For the Year Ended December 31
1
Sales
$1,125,000.00
2
Cost of goods sold:
3
Beginning inventory
$0.00
4
Cost of goods manufactured
840,000.00
5
Ending inventory
(210,000.00)
6
Total cost of goods sold
630,000.00
7
Gross profit
$495,000.00
8
Selling and administrative expenses
275,000.00
9
Income from operations
$220,000.00
Variable Statement
Under...
Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold.
Absorption StatementAbsorption costing does not distinguish between variable and
fixed costs. All manufacturing costs are included in the cost of
goods sold.Saxon, Inc.Absorption Costing Income StatementFor the Year Ended December 31Sales$1,275,000Cost of goods sold: Cost of goods manufactured$800,000 Ending inventory(120,000) Total cost of goods sold(680,000)Gross profit$595,000Selling and administrative expenses(286,000)Operating income$309,000Variable StatementUnder variable costing, the cost of goods manufactured includes
only variable manufacturing costs. This type of income statement
includes a computation of manufacturing margin.Saxon, Inc.Variable Costing Income StatementFor the Year Ended December 31Sales$1,275,000Variable...
A significant criticism of absorption costing is that it leads to inaccurate product costs. Is this...
A significant criticism of absorption costing is that it leads
to inaccurate product costs. Is this true? Why would a traditional
costing system lead to inaccurate product costs? And what could be
done about it? In your response, discuss whether your company
applies absorption costing in the decision-making process.
A significant criticism of absorption costing is that it leads to inaccurate product costs. Is this...
A significant criticism of absorption costing is that it leads
to inaccurate product costs. Is this true? Why would a traditional
costing system lead to inaccurate product costs? And what could be
done about it? In your response, discuss whether your company
applies absorption costing in the decision-making process.
write at least 150 words
Variable and Absorption Costing Chandler Company sells its product for $106 per unit. Variable manufacturing costs...
Variable and Absorption Costing
Chandler Company sells its product for $106 per unit. Variable
manufacturing costs per unit are $47, and fixed manufacturing costs
at the normal operating level of 12,000 units are $240,000.
Variable selling expenses are $18 per unit sold. Fixed
administrative expenses total $104,000. Chandler had no beginning
inventory in 2016. During 2016, the company produced 12,000 units
and sold 9,000. Would net income for Chandler Company in 2016 be
higher if calculated using variable costing or...
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