e e t t 2 True (T) or False (F) Answer Questions 1. Under variable costing, only those manufacturing costs that vary with output are treated as product costs. 2 Absorption costing treats fixed manufacturing overhead not a product cost, therefore, the ending inventory of finished goods does not have fixed manufacturing overhead. 3. Variable costing can be used externally for either financial or tax reporting. 4. Variable costing is used internally by managers for planning and control purposes. 5. The absorption costing approach works well with CVP analysis. 6 The basic difference between absorption costing and variable costing is the fixed selling and administrative expenses. 7. Selling and administrative expenses are treated as product costs under variable costing? 8. If the units produced and unit sales are equal, variable costing and absorption costing net operating income would be the same. 9. If the units produced exceed unit sales, variable costing will show a higher net operating income than absorption costing. 10. Under both costing methods, selling and administrative expenses are treated expensed on the income statement as incurred. 11. Cost centers are commonly evaluated using the product segment margin. 12. For purposes of evaluating performance of a business units are classified as cost centers, profit centers, and investment centers. 13. A traceable fixed cost supports more than one business segment. 14. Investment center is a business segment whose manager has control over cost and revenue. 15. Decentralized organization is an organization in which decision-making authority is not confined to a few top executives but rather is spread throughout the organization. 16. Margin is equal to Net operating income divided by average operating assets. 17. Segment margin is contribution margin less common fixed costs. 18. Contribution income statement uses absorption costing method. 19. Under profit center evaluation measurement is using variances analysis. 20. Traceable fixed cost is allocated to each segment to determine each segment net operating income