Choose the best answer for each of the following questions.

1.			Using absorption costing, a unit of product includes what costs?
			A)	Direct materials, direct labor, and fixed overhead.
			B)	Direct materials, direct labor, and variable overhead.
			C)	Direct materials, direct labor, variable overhead, and fixed overhead.
			D)	Only direct materials and direct labor.
2.			Using variable costing, a unit of product includes which costs?
			A)	Direct materials, direct labor, and fixed overhead.
			B)	Direct materials, direct labor, and variable overhead.
			C)	Direct materials, direct labor, variable overhead, and fixed overhead
			D)	Only direct materials and direct labor.
3.			Variable costing is also known as:
			A)	Indirect costing.
			B)	Direct costing.
			C)	Marginal costing.
			D)	Both (B) and (C).
4.			Using the following data, determine unit product cost under absorption costing. Units produced 1,000 Direct materials $6 Direct labor $10 Variable overhead $ 6 Variable selling and administrative $2 Fixed overhead $6,000 Fixed selling and administrative $2,000
			A)	$22
			B)	$24
			C)	$28
			D)	$30
5.			Using the following data, determine unit product cost under variable costing. Units produced 1,000 Direct materials $6 Direct labor $10 Variable overhead $6 Variable selling and administrative $2 Fixed overhead $6,000 Fixed selling and administrative $2,000
			A)	$22
			B)	$24
			C)	$28
			D)	$30
6.			Variable costing is attractive to managers as an alternative to absorption costing because:
			A)	Absorption costing makes distinctions between fixed and variable product costs.
			B)	Absorption costing is well suited to CVP analysis techniques.
			C)	Absorption costing provides useful tools to managers for planning and control.
			D)	To generate data for CVP analysis, considerable time would have to be invested to rework income statements constructed under absorption costing.
7.			Product cost under absorption costing is characteristically:
			A)	Higher than under variable costing.
			B)	Lower than under variable costing.
			C)	Equal to variable costing.
			D)	Higher sometimes and lower sometimes than variable costing.
8.			When production is equal to sales, which of the following is true?
			A)	No change occurs to inventories for either absorption costing or variable costing methods.
			B)	The use of absorption costing produces a higher net income than the use of variable costing.
			C)	The use of absorption costing produces a lower net income than the use of variable costing.
			D)	The use of absorption costing causes inventory value to increase more than they would though the use of variable costing.
9.			Advantages of variable costing include which of the following?
			A)	Data that are required for CVP analysis can be take directly from the contribution margin format income statement.
			B)	All things being equal, profit for the period is not affected by changing inventories.
			C)	Profits tend to move in the same direction as sales.
			D)	All of the above.
10.			What is the effect of variable costing and JIT inventory methods on net income?
			A)	Variable costing cannot be used in conjunction with JIT inventory methods.
			B)	The use of variable costing and JIT together eliminates the differences in inventory valuation that would normally be seen when compared with absorption costing.
			C)	The use of variable costing and JIT together minimizes the differences in inventory valuation that would normally be seen when compared with absorption costing.
			D)	Changes in inventory levels do not produce differences in net income as compared with absorption costing unless JIT inventory methods are also used.