The following information regarding fixed production costs from a manufacturing firm is available for the current year:

Fixed costs in the beginning inventory $ 16,000

Fixed costs incurred this period 100,000

Which of the following statements is not true? A)The maximum amount of fixed production costs that this firm could deduct using absorption costs in the current year is $116,000. B)The maximum difference between this firm's the current year income based on absorption costing and its income based on variable costing is $16,000. C)Using variable costing,this firm will deduct no more than $16,000 for fixed production costs. D)If this firm produced substantially more units than it sold in the current year,variable costing will probably yield a lower income than absorption costing.

Question

The following information regarding fixed production costs from a manufacturing firm is available for the current year:

Fixed costs in the beginning inventory	$ 16,000
Fixed costs incurred this period	100,000

Which of the following statements is not true? A)The maximum amount of fixed production costs that this firm could deduct using absorption costs in the current year is $116,000. B)The maximum difference between this firm's the current year income based on absorption costing and its income based on variable costing is $16,000. C)Using variable costing,this firm will deduct no more than $16,000 for fixed production costs. D)If this firm produced substantially more units than it sold in the current year,variable costing will probably yield a lower income than absorption costing.

Quizplus · Accepted Answer

Option C is not true because if a firm uses variable costing, no fixed production costs will be allocated to the product. Therefore, the firm will not deduct any fixed production costs from the cost of goods sold.

The Following Information Regarding Fixed Production Costs from a Manufacturing