uiz 6 for Prelims: ABSORPTION and VARIABLE COSTING (Auditing Specialized Industries) Multiple Choice (answer in LETTERS ONLY) 1. Which one of the following statements is correct regarding absorption costing and variable costing? a. Overhead costs are treated in the same manner under both costing methods b. If finished goods inventory increases, absorption costing results in higher income c. Variable manufacturing costs are lower under variable costing d. Gross margins are the same under both costing methods 2. Absorption costing and variable costing differ in that a. standards can be used with absorption costing, but not with variable costing b. absorption costing inventories are more correctly valued c. production influences income under absorption costing but not under variable costing d. companies using absorption costing have lower fixed costs 3. Variable costing and absorption costing will show the same incomes when there are no a. Beginning inventories c. variable costs b. ending inventories d. beginning and ending inventories 4. Which method of inventory costing treats direct manufacturing costs and manufacturing overhead costs, both variable and fixed, as inventoriable costs? a. Direct costing c. Absorption costing 6. Variable costing d. Conversion costing 5. Direct costing is used for internal purposes only which include