1. What factor related to manufacturing costs causes the difference in net earnings computed using absorption costing and net earnings computed using variable costing?

a. Absorption costing considers all costs in the determination of net earnings, whereas variable costing considers only direct costs.

b. Absorption costing "inventories" all direct costs, but variable costing considers direct costs to be period costs.

c. Absorption costing "inventories" all fixed manufacturing costs for the period in ending finished goods inventory, but variable costing expenses all fixed costs.

d. Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories, and variable costing considers all fixed costs to be period costs.

2. Using the average cost method of process costing, the computation of manufacturing cost per equivalent unit considers:

a. Current costs only.

b. Current costs plus cost of beginning work in process inventory.

c. Current costs plus cost of ending work in process inventory.

d. Current costs less cost of beginning work in process inventory.

True or False

3. A manufacturer generally wants to set a standard that can be achieved only under the most efficient operating conditions.

4. The materials quantity variance, in a standard cost system, is the difference between the actual quantity used and the actual quantity purchased multiplied by the standard unit price.