Answer the following statements true (T) or false (F)
1. When there are no units in the beginning Finished Goods Inventory and the units produced are more
than the units sold, the operating income will be higher under variable costing than absorption costing.
2. Under variable costing, the units in the beginning Finished Goods Inventory contain fixed
manufacturing overhead costs.
3. In variable costing, all fixed manufacturing overhead costs are expensed in the period incurred.
4. In absorption costing, the manufacturing costs expensed are greater than the amount expensed in
variable costing when units produced are less than sold because the units in beginning inventory under
absorption costing were assigned a greater cost in the previous accounting period.
5. When more units are sold than produced, operating income is less under absorption costing than
variable costing.
1. FALSE
2. FALSE
3. TRUE
4. TRUE
5. TRUE
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