a. Which of the following statements about absorption costing and variable costing systems is incorrect?

A. The only difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead costs, such as rent expense for factories.

B. The product cost computed using absorption costing will usually be larger than the product cost computed using variable costing.

C. Under absorption costing, rent expense for factories never affects net income.

D. Under variable costing, rent expense for factories reduces net income as incurred.

b. Bates Company currently uses job order costing and uses direct labor hours as the activity base to allocate manufacturing overheads to different jobs (Note: job order costing and process costing are two different methods under the absorption costing system). Which of the following sentences do not correctly describe the changes that may happen if the company decides to use activity-based costing instead?

A. Using job order costing, the company uses only one overhead rate to allocate manufacturing overhead. Using activity-based costing, the company may use multiple overhead rates to allocate manufacturing overhead.

B. The cost of each product computed using activity-based costing may be different from that computed using job order costing. The company may decide to change the selling price for each product according to the new costs computed.

C. Activity-based costing is usually complicated and therefore more expensive than job order costing. The company may need to spend more on its cost accounting system.

D. Using activity-based costing, the direct material costs and direct labor costs assigned to each product may be different from those assigned using job order costing.