COST ACCOUNTING
VARIABLE COSTING
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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greater than variable costing net income.
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less than variable costing net income
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equal to variable costing net income
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less than expected
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Detailed explanation-1: -Variable costing follows the trend of sales; if sales are greater than production, variable costing income is also higher than absorption costing, and sales are lower than production, variable costing income is also lower than absorption costing.
Detailed explanation-2: -If the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income. always be less than income determined using absorption costing.
Detailed explanation-3: -When production is less than sales for the period, absorption costing net operating income will generally be less than variable costing net operating income. 10. The salary of the treasurer of a corporation is an example of a common cost which normally cannot be traced to product segments.
Detailed explanation-4: -If production exceeds sales, the profit under absorption costing is higher as compared to variable costing. This is due to the deferral of fixed manufacturing overhead costs to the next period in ending inventory, leading to reduced cost of goods sold for the current period and hence a higher profit.
Detailed explanation-5: -1. When units produced are less than units sold, income under absorption costing is higher than income under variable costing.