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July 29, 2015

Homework Help: ACC

Posted by matt on Friday, November 16, 2007 at 10:15pm.

A reason why absorption costing income statements are sometimes difficult for the manager to interpret is that:
A)they omit variable expenses entirely in computing net operating income.
B)they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.
C)they include all fixed manufacturing overhead on the income statement each year as a period cost.
D)they ignore inventory levels in computing income charges.

Fleet Corporation produces a single product. The company manufactured 700 units last year. The ending inventory consisted of 100 units. There was no beginning inventory. Variable manufacturing costs were $6.00 per unit and fixed manufacturing costs were $2.00 per unit. What would be the change in the dollar amount of ending inventory if variable costing was used instead of absorption costing?
A)$800 decrease
B)$200 decrease
C)$0
D)$200 increase

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