Question

Knowledge Check 01

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________.

• all overhead costs

• fixed overhead costs

• selling and administrative expenses

• variable overhead costs

Knowledge Check 02

Absorption costing income statements ignore ________.

• direct materials and direct labor costs

• direct and indirect cost distinctions

• product and period cost distinctions

• variable and fixed cost distinctions

Knowledge Check 03

When the number of units produced is greater than the number of units sold, variable costing net operating income will be ________.

• the same as absorption costing net operating income

• greater than absorption costing net operating income

• less than absorption costing net operating income

Answer 1

Answers :

1) Fixed Overhead Cost

2)Variable cost and Fixed cost distinctions

3) lower than the Absorption costing net operating income

Two Methods of the Costing Reports income Statements :

Absorption costing is known as the Full costing method where it Considers the Fixed Manufacturing overheads also for Calculation of Product unit cost. whereas variable costing methods take Fixed overhead as a Fixed cost not included in the product cost

Fixed Manufacturing overheads are the Different in the net operating income Between the Absorption and Variable costing net operating income.

Absorption cost is not to divide the cost on the BAses of fixed and Variable nature of Cost

IF Number of Units Produced is more then the sold

Absorption costing net income will be More than the Variable costing net income