Variable-Costing Income Statement Preparation Quiz

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What is the total unit product cost per T-shirt for Happy Yarn Inc.?

P$2.50

P$5.00

P$3.50

P$4.50 (correct)

What is the net operating income for Happy Yarn Inc. using the variable costing method?

P$8,000

P$4,000 (correct)

P$12,000

P$17,000

In a variable costing income statement, what is included in the cost of goods sold?

Only variable manufacturing costs (correct)

All manufacturing costs

Fixed manufacturing costs

Variable selling and administrative expenses

What impact does an increase in production volume have on fixed costs in a variable costing income statement?

Fixed costs remain the same Signup and view all the answers

Which costing method would show a higher net income when production exceeds sales?

Absorption costing Signup and view all the answers

Which method, between variable costing and absorption costing, focuses on how changes in production volume affect net operating income?

Variable costing Signup and view all the answers

In a firm using variable costing, how do profits behave with sales fluctuations?

Profits fluctuate with sales Signup and view all the answers

In a variable costing income statement, how are fixed manufacturing costs treated?

Treated as period costs Signup and view all the answers

When production levels surpass normal capacity in a direct costing system, what is the inventory value comparison between companies?

Company Y reports a higher inventory value than Company Z Signup and view all the answers

How do unit product costs change in variable costing with varying production quantities?

Unit product costs remain constant Signup and view all the answers

What happens to fixed costs per unit when the activity level increases within the relevant range?

An increase in fixed cost per unit Signup and view all the answers

In an income statement using the direct costing method, where are fixed selling and administrative expenses typically included?

Be used in the computation of operating income but not in the computation of the contribution margin Signup and view all the answers

What are unabsorbed fixed overhead costs in an absorption costing system?

Fixed manufacturing costs not allocated to units produced Signup and view all the answers

When comparing variable costing and absorption costing, under what condition will both methods show the same net operating income?

Ending inventories Signup and view all the answers

What is a key difference between absorption costing and variable costing related to profits and sales fluctuations?

Profits may decrease with increased sales even if there is no change in selling prices and costs Signup and view all the answers

How does variable costing net income compare to absorption costing net income when production is lower than sales?

Variable costing net income is lower than absorption costing net income Signup and view all the answers

What characterizes variable costing with respect to the treatment of fixed selling and administrative expenses?

Fixed expenses are included in computing operating income but not in contribution margin Signup and view all the answers

Variable-Costing Income Statement Preparation Quiz

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