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Absorption Costing
Absorption Costing MCQs
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Which of the following is true of a company that uses absorption costing?
Net operating income fluctuates directly with changes in sales volume.
Fixed production and fixed selling costs are considered to be product costs.
Unit product costs can change as a result of changes in the number of units manufactured.
Variable selling expenses are included in product costs.
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Under absorption costing, fixed manufacturing overhead costs:
are deferred in inventory when production exceeds sales.
are always treated as period costs.
are released from inventory when production exceeds sales.
none of these.
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Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing? Vari...
Yes; Yes
Yes; No
No; Yes
No; No
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Under absorption costing, product costs include: Fixed factory overhead; Variable factory overhead
No; No
No; Yes
Yes; Yes
Yes; No
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When production exceeds sales, the net operating income reported under absorption costing generally will be:
less than net operating income reported under variable costing.
greater than net operating income reported under variable costing.
equal to net operating income reported under variable costing.
higher or lower because no generalization can be made.
?
A single-product company prepares income statements using both absorption and variable costing methods. Manufacturing overhead cost applied per unit p...
Less than units sold in year 2.
Less than the activity level used for allocating overhead to the product.
In excess of the activity level used for allocating overhead to the product.
In excess of units sold in year 2.
?
The type of costing that provides the best information for breakeven analysis is:
job-order costing.
variable costing.
process costing.
absorption costing.
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Absorption costing is closely related to which of the following cost elements?
Total costs
Overheads
Prime costs
Direct labor
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MNance Corp began operations in January. The company produced 50,000 units and sold 45,000 units in its first year of operations. Costs for the year ...
Variable would be $25,000 higher.
Absorption would be $25,000 higher.
Variable would be $32,500 higher.
Absorption would be $32,500 higher.
?
Osawa planned to produce and actually manufactured 200,000 units of its single product in its first year of operations. Variable manufacturing costs w...
$200,000
$440,000
$600,000
$840,000
?
Product sales: 1,000 units at $10 each Variable manufacturing costs: $5.50 per unit Fixed manufacturing overhead: $1,200 Variable selling and admin...
$1,800
$1,967
$2,000
$2,167
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Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Da...
$900,000
$1,200,000
$1,220,000
$1,350,000
?
Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Da...
$2,095,000
$2,120,000
$2,055,000
$2,030,000
?
Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Da...
$65,000
$25,000
$40,000
$90,000
?
When a firm prepares financial reports using absorption costing:
Profits will always increase with increases in sales.
Profits will always decrease with decreases in sales.
Profits may decrease with increased sales even if there is no change in selling prices and costs.
Decreased output and constant sales result in increased profits.
