1.When reconciling variable costing and absorption costing net operating income,

Question

1.When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income.

True
False

2.The selling and administrative budget is typically prepared before the cash budget.
True
False

3.The internal rate of return method assumes that the cash flows generated by the project are immediately reinvested elsewhere at a rate of return that equals the company’s cost of capital.

True
False

Explanation / Answer

1- Answer is False

It should be added in variable costing net operating income to arrive at the absorption costing net operating income.

2-True

it is prepared in the following sequence- Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet.

3-False - it is reinvested at a rate of return equal to internal rate of return

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