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:

External Customers

Individuals or entities that purchase goods or services from a business but are not part of the organization itself.

Revenue Test

A criterion used to determine the recognition of revenue in accounting, which stipulates that revenue can be recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably.

Profit or Loss Test

A method used to determine the effectiveness and efficiency of a business by comparing its profits or losses over a specific period.

Asset Test

A means of determining an individual's or entity's ability to meet its financial obligations by comparing its liquid assets against its current liabilities.