Question

Match the appropriate costing method to the description

a.Absorption costing only
b.Variable costing only
c.Both absorption and variable costing

1.Treats fixed selling cost as a period cost.
2. Required by generally accepted accounting principles.
3. Treats fixed manufacturing cost as a period cost.
4. Operating income is impacted by changes in inventory level.
5. Generally provides the most useful report for controlling costs.
6.Generally provides the most useful report for setting long-term prices.
7.May be used in a manufacturing company.
8. Includes gross profit on the income statement

Answer 1

• a. Absorption costing only -- 8. Includes gross profit on the income statement
• 2. Required by generally accepted accounting principles.
• b. Variable costing only -- 6. Generally provides the most useful report for setting long-term prices.
• 3. Treats fixed manufacturing cost as a period cost.
• 5. Generally provides the most useful report for controlling costs.
• 4. Operating income is impacted by changes in inventory level.
• c. Both absorption and variable costing -- 7.May be used in a manufacturing company
• 1.Treats fixed selling cost as a period cost.

Step-by-step explanation:

• The absorption costing includes that all the manufacturing costs which are given to the units produced and the cost of a finished product will be the cost of the direct material and labor.

• Variable cost is a method that assigned the variables costs to the inventories and means that overall cost changes to expenses in a time of occurrence.

• Both of these costs are related to the method of the production and costs that are incurred in the production and in which method the company uses to make.