Acct 101

True/False Questions 1. Under variable costing, only variable production costs are treated as product costs. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 2. Under variable costing, variable selling and administrative costs are included in product costs. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 3. Absorption costing treats all manufacturing costs as product costs. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 4. In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost. Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 5. Absorption costing treats fixed manufacturing overhead as a period cost. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy 6. When the number of units in work in process and finished goods inventories increase, absorption costing net operating income will typically be greater than variable costing net operating income. Ans: True AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Easy 7. Net operating income computed using absorption costing will always be greater than net operating income computed using variable costing. Ans: False AACSB: Analytic AICPA FN: Reporting LO: 2 AICPA BB: Critical Thinking Level: Easy

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

7-5

8. When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income. Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium 9. When...