Which of the following costing methods provide(s) the added benefit of usefulness for external reporting purposes? variable Absorption I only II only Both I and II. Neither I nor II. Which of the following must be known about a production process to institute a variable costing system. The variable and fixed components of all costs related to production. The controllable and noncontrollable components of all costs related to production. Standard production rates and times for all elements of production. Contribution margin and breakeven point for all goods in production. What costs are treated as product costs under variable costing? Only direct costs. Only variable production costs. All variable costs All variable and fixed manufacturing costs. The change in period-to-period operating income when using variable costing can be explained by the change in the Unit sales level multiplied by the unit sales price Finished goods inventory level multiplied by the unit sales price. Unit sales level multiplied by a constant unit contribution margin. Finished goods inventory level multiplied by constant unit contribution margin. Which of the following statements is true for a firm that uses variable costing? The cost of a unit of product changes because of changes in number of units manufactured. Profits fluctuate with sales. An idle facility variation is calculated. Product costs include variable administrative costs. The management of a company computes net income using both absorption and variable costing. This year, the net income under the variable-costing approach was greater than the net income under the absorption-costing approach. This difference is most likely the result of A decrease in the variable marketing expenses Sales volume exceeding production volume An increase in the finished goods inventory Inflationary effects on overhead costs. In the application of variable costing as a cost-allocation process in manufacturing. Variable direct costs are treated as period costs Variable indirect costs are treated as product costs Nonvariable indirect costs are treated as product costs Nonvariable direct costs are treated as product costs Which method of inventory costing treats direct manufacturing costs and manufacturing overhead cost, both variable and fixed, as inventoriable cost? Direct costing Variable costing Absorption costing Conversion costing When a firm prepares financial reports by using absorption costing. Profits will always increase with increases in sales Profits will always decrease with decreases in sales. Profits may decrease with increased sales even if there is no change in selling prices and costs. Decreased output and constant sales result in increased profits. Which one of the following statements is true regarding absorption costing and variable costing? Overhead costs are treated in the same manner under both costing methods If finished goods inventory increases, absorption costing results in higher income. Variable manufacturing costs are lower under variable costing. Gross margins are the same under both costing methods. Which one of the following considers the impact of fixed overhead costs? Full absorption costing. Direct costing Marginal costing. Variable costing Under variable (direct) costing, fixed manufacturing overhead costs are classified as Administrative costs Selling costs. Inventoriable costs Period costs At the end of a company's first year of operations, 2,000 units of inventory are on hand. Variable costs are $100 per unit, and fixed manufacturing costs are $30 per unit. The use of absorption costing, rather than variable costing, would result in a higher net income of what amount? $60.000 $140,000 $200,000 $260 000