Which of the Following Statements Is True

question 68

Multiple Choice

Which of the following statements is true?

• A)Under absorption costing some fixed manufacturing costs are deferred in ending inventory if production is lower than sales.
• B)When production and sales are equal, net income will be greater under variable costing than it will be under absorption costing.
• C)Under absorption costing only the fixed manufacturing cost associated with inventory produced are expensed.
• D)Under variable costing fixed manufacturing costs are expensed in the period in which they are incurred regardless of when the inventory is sold.

---

Definitions:

Income Summary

An account in which the revenues and expenses are transferred at the end of an accounting period to determine the net income or loss.

Owner's Capital

The amount of money and other assets invested in a business by its owner or owners.

Owner's Drawings

The withdrawal of business assets by the owner for personal use.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts in preparation for the new accounting period.