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This preview shows page 1 out of 1 page. Question:“Absorption-costing income exceeds variable-costing income when the number of units soldexceeds the number of units produced.”Do you agree?Explain.Answer:No, not agree with the statement.When the number of units sold exceeds the number of units produced then income under absorptioncosting is lower than variable costing approach.ConceptThese are the technique of product costing; absorption costing & variable costing (also known asmarginal costing). In absorption cost, all direct, indirect & fixed factory overheads are charged to productcosts based on normal production using absorption rate.There may be possible that actual overheadmay differ from applied overhead then under-absorption or over absorption is adjusted with cost ofgoods sold.While in variable costing product cost would be marginal cost of production & marginal costof sales. Only variable costs are charged to production. Fixed costs are expensed off against the revenuein the period in which they are incurred.Absorption Vs. Variable Costing:Thus, when a unit is sold the fixedoverhead cost per unit isincluded in the expense ‘Cost of goods sold’shown on the income statement while if theunit is unsold, the fixed overhead cost per unit is included in End of preview. Want to read the entire page? Upload your study docs or become a Course Hero member to access this document When the number of units sold exceed the number of units produced, income reported under absorption costing will be lower than variable costing. Which of the following gives the best justification of the above statement?
 Q: When units sold exceeds, units produced, basis a. net income under absorption costing is higher than… A: Absorption is an important method of costing in Accounting System. It refers to those costs which… Q: Which of the following is FALSE regarding Variable Costing? O A. Net income will only change if the… A: Variable costing is a technique of cost accounting where the fixed overheads are not included in the… Q: Which of the following statements is true for a company that uses variable costing? Profit… A: Profit fluctuates with sales Profit increases with increases in sales and vice versa. Product… Q: When units produced are less than units sold, income under absorption costing is higher than income… A: The income statement can be prepared using various methods as variable costing and absorption… Q: When units sold exceeds units produced the relationship between net income under absorption costing… A: THE VARIABLE COSTING METHOD TREATS FIXED MANUFACTURING OVERHEAD COSTS AS PERIOD COSTS , ALL FIXED… Q: Inventory values calculated using variable costing as opposed to absorption costing will generally… A: Inventory is referred to as current asset which includes raw materials, work in process inventory… Q: A reason why absorption costing income statements are sometimes difficult to interpret is that:… A: When the company decides to allocate all the costs to the product ie. the allocation of variables as… Q: Net profit under absorption costing may differ from net profit determined under d costing. How is… A: The variable costing includes variable manufacturing costs in its production cost and absorption… Q: Which of the following would most likely decrease the product cost per unit under variable costing?… A: Under variable costing, product cost per unit will comprise of direct material cost , direct labour… Q: Over extended periods of time, the net income figures reported under absorption costing will be: a.… A: Under absorption costing, unit cost is calculated on the basis of total cost including fixed and… Q: Which formula reconciles the difference between absorption and variable-costing income? a. Change… A: Net operating income under absorption costing = Net operating income under variable costing + Change… Q: (a) What is the customer margin under activity-based costing when the number of orders increases to… A: Customer Margin under Activity based costing = $ 7,640 Customer Margin under Traditional costing = $… Q: First: The inventory value shown on the balance sheet is generally higher under absorption costing… A: Under variable costing, product cost consists of only variable manufacturing costs. Under… Q: Under variable costing a. Net income will tend to vary inversely with production changes b. Net… A: DM=Direct materials OHD=Overhead Step 1 Variable costing is a method that only allocates… Q: Considering the data given above, under variable costing and absorption costing, ending inventory… A: Income statement: The income statement determines the net income of the business by subtracting the… Q: Identify if true or false 1. If the ending inventories happened to be zero, the net profit reported… A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for… Q: When inventory increases, the fixed manufacturing overhead is deferred in inventory under:"… A: Under Variable costing method, only variable cost is assigned to inventory. Q: (a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based… A: ABC stands for Activity based costing which is the method that assigns the overhead as well as… Q: ?Which of the following statements is false Activity-based costing typically provides less… A: In order to solve in this question, we need to analyse the given statement one-by-one. Q: Which of the following statements is not true regarding the use of variable and absorption costing… A: Answer: Option d. Q: What factor, related to manufacturing costs, causes the difference in net earnings computed using… A: The question is related to Marginal Costing and is multiple choice question. Q: Net earnings determined using full absorption costing can be reconciled to net earnings determined… A: Solution: Net earnings determined using full absorption costing can be reconciled to net earnings… Q: 7. Under variable costing, which of the following costs are assigned to inventory? Variable Selling… A: Hi Student Since there are multiple questions we will answer only first question. If you want… Q: Under variable costing: a. Net operating income will always be higher than under absorption costing.… A: Under variable costing, the inventory cost is valuate on the basis of variable manufacturing cost… Q: If the cost of goods manufactured is less than the cost of goods sold, which of the following is… A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,… Q: If the cost of goods manufactured is less than the cost of goods sold, which of the following is… A: Financial statements are statements which states the business activities performed by the company .… Q: How is operating income affected if the number of units sold exceeds the number of units produced?… A: Under variable costing, fixed manufacturing overhead is considered as a period cost and deducted a… Q: Which of the following is true about absorption costing? No fixed factory overhead is charged to… A: Solution: The true statement about absorption costing is that "over-applied factory overhead is… Q: a) What is the customer margin under activity-based costing when the number of orders increases to… A: In the given question Office Mart Order consists of following Customers 1 Customer Orders 11… Q: All these statements are true for Marginal costing except this O Costs are segregated based on… A: Marginal costing refers to the costing approach in which, variable costs are considered as the… Q: If the cost of goods manufactured is less than the cost of goods sold, which of the following is… A: Cost Accounting: It is the process of collecting, recording, analyzing the cost, summarizing cost,… Q: Do you agree with the following statements? Check only those with which you agree. Check All That… A: Variable Costing refers to those costs which are directly related to the production and changes with… Q: Which of the following is true of a company that uses absorption costing? Multiple Choice Net… A: Absorption costing: Under the absorption costing method, manufacturing costs such as direct material… Q: Which of the following is not a potential advantage of variable costing relative to absorption… A: Variable costing is a method in which only variable cost is considered in product cost. Absorption… Q: In an income statement prepared as an internal report using the variable costing method, fixed… A: Net operating income under absorption costing = Net operating income under variable costing +… Q: T, F. In a make or buy short-run decision situation, the critical element to consider is whether the… A: Variable cost is that cost that varies with the number of units produced. It means that increase in… Q: The adjustment of underapplied manufacturing overhead cost results in all the following , EXCEPT a.… A: Under-applied overhead happens once the budgeted producing overhead is a smaller amount than the… Q: Traditional Volume-based costing allocates indirect product costs based on the volume of output,… A: Note: Hello. Since your question has multiple parts, we will solve the first question for you. If… Q: Which of the following is not relevant is not relevant in determining weighted average unit cost in… A: Process costing is one of the methodology that is used in cost accounting. Under this, output of one… Q: (d) What is the net operating income (loss) in Year 2 under variable costing? (e) The net operating… A: “Since you have posted a question with many sub-parts, we will solve three sub-parts for you. 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Publisher:Cengage Learning, Principles of Cost Accounting ISBN:9781305087408 Author:Edward J. Vanderbeck, Maria R. Mitchell Publisher:Cengage Learning When the number of units sold exceeds the number of units produced net income under absorption costing will be?If the number of units produced exceeds the number of units sold, then net operating income under absorption costing will: be equal to the net operating income under variable costing.
When the number of units sold exceeds the number of units produced income reported?When the number of units sold exceed the number of units produced, income reported under absorption costing will be lower under absorption than under variable costing.
When production is more than units sold then the income under absorption costing will be?When units produced are greater than units sold, i.e., units in inventory increase, absorption income is greater than variable costing income because absorption costing defers a portion of fixed manufacturing costs in finished goods inventory.
When production exceeds sales the net operating income reported under absorption costing is?When production exceeds sales, the net operating income reported under absorption costing generally will be: greater than net operating income reported under variable costing.
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When the number of units sold exceeds the number of units produced income reported under absorption?
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