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Variable vs Absorption Costing(Quick Test)

Author:
Harold Averkamp, CPA, MBA

After you have answered all 25 questions, click "Grade This Quick Test" at the bottom of the page to view your grade and receive feedback on your answers.

Note: Some of the following test questions may not have been covered in the Explanation or Practice Quiz for this topic. For more insight regarding a specific question, use the search box at the top of the page.

    1. 1. Variable costing is also known as __________ costing.

    2. 2. Under variable costing, the __________ manufacturing overhead is not assigned to products.

    3. 3. Sales minus all variable costs and expenses equals the __________ __________.

    4. 4. A cost that is part fixed and part variable is referred to as a semivariable or __________ cost.

    5. 5. Which of the following would be considered to be the conventional method for inventory costing?

    6. 6. In an accounting year when the number of units produced is the same as the number of units sold, the net income under absorption costing will be __________ __________ the net income under variable costing.

    7. 7. In an accounting year when the number of units manufactured exceeds the number of units sold, the net income using absorption costing will be __________ __________ the net income under variable costing.

    8. 8. Variable and fixed manufacturing overhead costs are assigned to products because of __________.

    9. 9. If a manufacturer wanted to increase its gross profit in the short term, which of the following would be compatible?

    10. Select one of the following four answers that best matches each of the items listed as 10 - 20:

      Absorption costing
      Variable or direct costing only
      Both absorption and variable costing
      Neither absorption nor variable costing

    11. 10. Fixed selling and nonmanufacturing administrative expenses are reported as product costs.

    12. 11. Required by GAAP for external financial reports.

    13. 12. Fixed manufacturing costs are inventoriable.

    14. 13. Is more compatible with cost-volume-profit analysis.

    15. 14. Will be used with an income statement that reports the amount of gross profit.

    16. 15. Variable selling expenses are reported as period expenses.

    17. 16. Variable manufacturing costs are inventoriable.

    18. 17. Fixed manufacturing overhead costs are assigned to products.

    19. 18. Will be used with an internal income statement that reports contribution margin.

    20. 19. Fixed manufacturing costs are treated as period costs instead of product costs.

    21. 20. Variable manufacturing overhead costs are assigned to products.

    22. Use the following information for answering Questions 21 - 25:
      During the past year a company budgeted, manufactured, and sold 100,000 units of its only product. The selling price was $30 each.

    23. 21. If the company uses variable costing for its internal financial statements and it had one unit in inventory, its internal balance sheet would report the unit at $__________.

    24. 22. If the company uses absorption costing for its external financial statements and it had one unit in inventory, its external balance sheet would report the unit at $__________.

    25. 23. The product’s contribution margin per unit is $__________.

    26. 24. The product’s gross profit per unit is $__________.

    27. 25. Assuming the company manufactured and sold 100,000 units, its net income before tax will be $__________ under direct costing, and $__________ under absorption costing.

Any questions left unanswered will be marked incorrect.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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