Consider the Following Comments About Absorption- and Variable-Costing Income Statements

question 50

Multiple Choice

Consider the following comments about absorption- and variable-costing income statements:
I. A variable-costing income statement discloses a firm's gross margin.
II. Cost of goods sold on an absorption-costing income statement includes fixed costs.
III. The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements.
Which of the above statements is (are) true?

• A) I only.
• B) II only.
• C) I and II.
• D) II and III.
• E) I, II, and III.

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Definitions:

Public Good

A good that is non-excludable and non-rivalrous, meaning individuals cannot be effectively excluded from its use, and one individual's use does not reduce availability to others.

Asymmetric Information

A situation where one party to a market transaction has much more information about a product or service than the other. The result may be an under- or overallocation of resources.

Inefficient Outcomes

Situations where resources are not allocated optimally, resulting in potential losses in economic welfare.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making someone else worse off, often achieved when marginal cost equals marginal benefit.