11.The level of inventory at the end of the year does affect the calculation of operating income under both variable and absorption costing.
12.When there are zero units in Beginning Finished Goods Inventory and the units produced are more than the units sold, the operating income will be lower under variable costing than under absorption costing.
13.Variable costing is required by Generally Accepted Accounting Principles (GAAP) for financial statement purposes.
14.Which of the following costing methods charges all manufacturing costs to its products?
a. Direct costing
b. ABC costing
c. Variable costing
d. Absorption costing
15.Because they do not change, fixed costs are irrelevant for short-term pricing decisions.
16.For short-term pricing decisions, absorption costing is an appropriate costing method to use.
17.When setting long-term sales prices for products, that sales price must cover all costs, including fixed costs.
18.Variable costing is more beneficial than absorption costing in making decisions whether to increase production capacity of a manufacturing facility.
19.Cost information from both absorption costing and variable costing can aid managers in pricing.
20.Managers should accept special orders provided the special order price exceeds full cost.