2. Under variable costing, variable selling and administrative costs are included in product costs.
3. Absorption costing treats all manufacturing costs as product costs.
4. In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost.
5. Absorption costing treats fixed manufacturing overhead as a period cost.
6. When the number of units in work in process and finished goods inventories increase, absorption costing net operating income will typically be greater than variable costing net operating income.
Ans: True LO: 2,3
7. Net operating income computed using absorption costing will always be greater than net operating income computed using variable costing.
Ans: False LO: 2
8. When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.