Reference no: EM132542151

Question 1: Under GAAP,

Option 1: absorption costing is required to be used for the costing of inventory for external reporting purposes.

Option 2: net income highlights differences between variable and fixed costs.

Option 3: measured net income is often used externally to evaluate performance, justify cost increases, or evaluate new projects.

Option 4: measured net income is often used internally to evaluate performance, justify cost increases or evaluate new projects.

Question 2: Which of the following is not a potential advantage of variable costing relative to absorption costing?

Option 1: Net income calculated under variable costing is unaffected by changes in production levels.

Option 2: It is easier to understand the impact of fixed and variable costs on the computation of net income when variable costing is used.

Option 3: The use of variable costing is consistent with cost-volume-profit analysis.

Option 4: Net income calculated under variable costing is not closely tied to changes in sales levels.