Variable and Absorption Costing Flashcards
This type of costing includes all costs, whether variable or fixed, which are related to production:
a. Throughput costing
b. Super absorption costing
c. Variable costing
d. Conventional costing
d.
Absorption costing is also known as “Conventional costing”
This costing has only Raw Materials as product cost and treats all other costs as period cost.
a. Super Variable Costing
b. Throughput Costing
c. Variable Costing
d. Absorption Costing
a
This cost is inventoried when incurred and will be charged against revenues at point of sale.
a. Period cost
b. Product cost
c. Opportunity cost
d. Sunk cost
b.
Choose the true statement.
S1 - Examples of product costs are direct labor, raw materials, and depreciation of office equipment.
S2 - Product costs are often treated as inventory and are used to value the inventory.
a. S1
b. S2
c. Both S1 and S2
d. Neither S1 nor S2
b.
Depreciation of office equipment is not tied to production, hence it is a period cost.
Which of the following costs is supported by the “Immediate Recognition” Matching Principle?
a. Fixed costs
b. Variable costs
c. Period costs
d. Product costs
c.
The following are examples of period costs, except for one:
a. Depreciation of factory machinery
b. Advertising expense
c. Depreciation of office furniture
d. Heat, light and water of the accounting department
a
Which of the following statements is incorrect regarding variable and absorption costing?
a. In variable costing, fixed overhead is treated as an expense, while in absorption costing, such is inventoriable.
b. Variable costing and absorption costing is ideal for external reporting purposes
c. Absorption costing is used for external reporting purposes.
d. None of the choices are incorrect.
b.
Halo Company, a company producing gaming chairs, started operations in 20x1. Halo produced 8,000 chairs and had an ending inventory of 3,000 chairs. Under which costing system would Halo generate the least net income?
a. Absorption costing
b. Variable costing
c. Both would yield the same results
d. None of the choices
b.
If P>S. AC>VC.
If P<C, AC<VC
Halo Company, a company producing gaming chairs, started the year 20x1 with 4,000 chairs in its beginning inventory. During the year, Halo produced 8,000 chairs and had an ending inventory of 3,000 chairs. Under which costing system would Halo generate the most net income?
a. Absorption costing
b. Variable costing
c. Both would yield the same results
d. None of the choices
b.
Choose the correct statement:
a. Variable costing is intended for external reports and is used for profitability analysis.
b. Absorption costing segregates costs according to function
c. Variable costing reports uses the conventional income statement.
d. All of the choices are correct.
b.
True or false: regardless of whether it is value adding or not, selling and administrative expenses under throughput costing is a period cost.
a. True
b. False
c. Neither, as an accounting policy
d. Depends on the situation
a.
However, if this were super absorption costing, this would be a product cost (provided if it is value adding)
Which of the following costing methods does not treat direct materials as period costs?
a. Variable costing
b. Super absorption costing
c. Absorption costing
d. All of the choices
d.
“Does not treat direct materials as period costs” = treated as product costs
Which is a performance issue of absorption costing?
a. Manufacturing products which absorb the highest amount of fixed costs, regardless of demand.
b. Not accepting an order to decrease production
c. Performing maintenance ahead of schedule
d. None of the choices
a.
This level of capacity does not allow for maintenance, shutdowns, interruptions or other factors that would slow down or halt production.
a. Practical capacity
b. Theoretical capacity
c. Normal capacity
d. Master-budget capacity
b.
Level of capacity that satisfies average customer demand over a period of time, which is often 2-3 years.
a. Practical capacity
b. Theoretical capacity
c. Normal capacity
d. Master-budget capacity
c.
