1. When the goods are sold, the Cost of Goods Sold account is increased and the Finished Goods Inventory account is decreased for the selling price of the goods sold.

True

False

2. At the end of an accounting period, the balance in the Finished Goods Inventory account is made up of the costs of products that have been completed and sold as of that date.

True

False

3. External reporting rules require the use of absorption costing, while variable costing is optional, but often better for use by managers in making operating decisions.

True

False

4. A scatter diagrams purpose is to determine if a linear relationship exists between a cost item and its related activity measure.

True

False

5. A manufacturing companys product costs include direct materials, direct labor and administrative expenses.

True

False