Question

Which of the following is true of absorption costing? It expenses marketing costs as cost of goods sold. It treats direct manufacturing costs as a period cost. It includes fixed manufacturing overhead as an inventoriable D) It treats indirect manufacturing costs as a period cost. Answer: 17. Which of the following is true of variable costing? A) It expenses administrative costs as cost of goods sold. B) It treats direct manufacturing costs as a product cost. It includes fixed manufacturing overhead as an inventoriable cost D) It is required for external reporting to shareholders. Answer: 18. AAA Manufacturing Inc, makes a product with the following cos th the following costs personit Direct materials $180 Direct labor $20 Manufacturing overhead (variable) 530 Manufacturing overhead (fixed) $130 Marketing costs $75 What would be the inventoriable cost per unit under variable costing and what absorption costing? A) $180 for variable costing and $305 under absorption costing B) $230 for variable costing and $305 under absorption costing C) $230 for variable costing and $360 under absorption costing D) $200 for variable costing and $305 under absorption costing Answer: ne and what would it be und 19. Swan Textiles Inc. produces and sells a decorative pillow for $98.00 per unit. In the first one operation, 2,200 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes Variable manufacturing costs Variable marketing costs Fixed manufacturing costs Administrative expenses, all fixed Ending inventories Direct materials WIP Finished goods $22.00 per unit $3.90 per unit $14 per unit $19.50 per unit -0- 400 units What is the operating income using variable costing? A) $129,780 B) $69,480 $104,580 D) $56,080 Answer:

Answer 1

Solution 16:

The true statement regarding absorption costing is "It includes fixed manufacturing overhead as inventoriable cost"

Hence option C is correct.

Solution 17:

The true statement regarding variable costing is "It treats direct manufacturing cost as a product cost"

Hence option B is correct.

Solution 18:

Inventorable cost under variable costing = Direct material + Direct labor + Variable manufacturing overhead

= $180 + $20 + $30 = $230 per unit

Inventorable cost under absorption costing = Direct material + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= $180 + $20 + $30 + $130 = $360 per unit

Hence option C is correct.

Solution 19:

Operating income under variable costing = sales - Variable cost - Fixed manufacturing cost - Fixed administrative costs

= (1800*$98) - (1800*$25.90) - (2200*$14) - (2200*$19,50)

= $176,400 - $46,620 - $30,800 - $42,900

= $56,080

Hence option D is correct.