When Comparing Absorption and Variable Costing Which of the Following

question 30

Multiple Choice

When comparing absorption and variable costing which of the following is false?

• A)The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead.
• B)Selling and administrative costs are period costs under both absorption and variable costing.
• C)Companies that use just-in-time processing techniques will have significant differences between absorption and variable-costing net income.
• D)Absorption costing will show a higher net income than variable costing whenever there are more units produced than sold.

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Definitions:

Cost of Sales

The direct costs attributable to the production of the goods sold by a company, including materials, labor, and manufacturing overhead.

Contractual Agreement

A legally binding agreement between two or more parties, outlining their responsibilities and obligations.

Equity Method

An accounting technique used to record investments in associated companies, where the investment is initially recorded at cost and subsequently adjusted for the investor's share of the investee's net profit or loss.

Proportionately Adjusted Retained Earnings

Retained earnings adjusted in proportion to ownership interest in a company or investment.