COST ACCOUNTING
VARIABLE COSTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
The difference in Net Incomes can be accounted for by the differences in Ending Inventory
|
|
|
The difference in Net Incomes can be accounted for by the differences in Beginning Inventory
|
|
|
The difference in Net Incomes can be accounted for by the differences in Selling Expenses
|
|
|
The difference in Net Incomes can be accounted for by the differences in Administrative Expenses
|
Detailed explanation-1: -(2) When units produced is greater than units sold, absorption costing yields the highest profit.
Detailed explanation-2: -When units produced are greater than units sold, i.e., units in inventory increase, absorption income is greater than variable costing income because absorption costing defers a portion of fixed manufacturing costs in finished goods inventory.
Detailed explanation-3: -If production exceeds sales, units of product are added to inventory. These units carry a portion of the current period’s fixed manufacturing overhead costs into the inventory account, thereby reducing the current period’s reported expenses and causing net operating income to increase.
Detailed explanation-4: -When the number of units in work in process and finished goods inventories increase, absorption costing net income will typically be greater than variable costing net income. 5. When JIT methods are introduced, the difference in net income computed under the absorption and variable costing methods is reduced.