VARIABLE COSTING: A DECISION-MAKING PERSPECTIVE TRUE-FALSE STATEMENTS

1. Full costing is equivalent to absorption costing. 2. In full or absorption costing, all manufacturing costs are charged to the product. 3. Variable costing is the approach used for external reporting under generally accepted accounting principles. 4. Fixed manufacturing costs are not charged to the product under variable costing. 5. The difference between absorption costing and variable costing is the treatment of fixed manufacturing overhead. 6. Fixed manufacturing overhead is a period cost under absorption costing. 7. Selling and administrative costs are period costs under both absorption and variable costing. 8. Manufacturing cost per unit will be higher under variable costing than under absorption costing. 9. Some fixed manufacturing costs of the current period are deferred to future periods through ending inventory under variable costing. 10. When units produced exceed units sold, income under absorption costing is higher than income under variable costing. 11. When units sold exceed units produced, income under absorption costing is higher than income under variable costing. 12. GAAP requires that absorption costing be used for the costing of inventory for external reporting purposes. 13. Net income under GAAP highlights differences between variable and fixed costs. 14. When absorption costing is used for external reporting, variable costing can still be used for internal reporting purposes. 15. When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income. 16. Net income under variable costing is unaffected by changes in production levels. 17. The use of absorption costing facilitates cost-volume-profit analysis. 18. Net income under variable costing is closely tied to changes in sales levels. 19. Companies that use just-in-time processing techniques will have significant differences between absorption and variable costing net income. 20. Sales mix is a measure of the percentage increase in sales from period to period. 21. Sales mix is not important to managers when different products have substantially different contribution margins. 22. The weighted–average contribution margin of all the products is computed when determining the