Indicate Whether Each of the Following Statements Is True or False

question 50

Short Answer

Indicate whether each of the following statements is true or false.
Under variable costing,the cost of inventory includes variable product costs and variable selling and administrative expenses.______
Under absorption costing,the income statement is prepared using a contribution margin approach.______
Variable costing is not allowed for external financial reporting,but many companies find it useful for internal managerial reports.______
Under absorption costing,fixed manufacturing costs are expensed in the period incurred.______
Under variable costing,fluctuations in sales influence net income,but fluctuations in production do not.______

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Definitions:

Conversion Cost

The combined cost of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Direct Labor

The wages or salaries paid to workers directly involved in the production of goods or services.

Indirect Material Cost

Costs of materials that are part of the production process but are not directly traceable to a finished product.

Lubricants

Substances applied to reduce friction between surfaces in mutual contact, which ultimately decreases the heat generated when the surfaces move.