COST ACCOUNTING
VARIABLE COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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There must have been some Beginning Inventory at the start of the period
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There must have been some amount remaining in Ending Inventory at the end of the period
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The company cannot have had any Beginning Inventory for this period
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The difference between Net Incomes under Absorption and Variable Costing is fully accounted for by the difference in Ending Inventory
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Detailed explanation-1: -Thus, if the beginning inventory is understated, the cost of goods available for sale will be understated and the cost of goods sold will also be understated. As a result, the net income will be overstated.
Detailed explanation-2: -What Is Beginning Inventory? Beginning inventory is the total monetary value of items that are in stock and ready to use or sell at the start of an accounting period. Also called opening inventory, beginning inventory matches the previous accounting period’s ending inventory.
Detailed explanation-3: -What is beginning and end inventory? Beginning inventory is the amount of a particular item that a business has in stock at the start of an accounting period. End inventory is the amount of a particular item that a business has in stock at the end of an accounting period.
Detailed explanation-4: -Beginning inventory is an asset account, and is classified as a current asset. Technically, it does not appear in the balance sheet, since the balance sheet is created as of a specific date, which is normally the end of the accounting period, and so the ending inventory balance appears on the balance sheet.