Exam 8: Absorption and Variable Costing,and Inventory Management

If the number of units produced in a period is smaller than the number of units sold in period,absorption costing income will be higher than variable costing income.

Inventory values calculated using variable costing as opposed to absorption costing will generally be

The economic order quantity (EOQ)is the quantity that

Laird Company uses 405 units of a part each year.The cost of placing one order is $5; the cost of carrying one unit in inventory for a year is $2.Laird currently orders 81 units at a time. Laird Company uses 405 units of a part each year.The cost of placing one order is $5; the cost of carrying one unit in inventory for a year is $2.Laird currently orders 81 units at a time.

Inventory under absorption costing includes only direct materials and direct labor.

Figure 8-7. Ramon Company reported the following units of production and sales for June and July 2011: Income under absorption costing for June was $40,000; income under variable costing for July was $50,000.Fixed costs were $600,000 for each month. Refer to Figure 8-7.How much was income for July using absorption costing?

Gross margin is to absorption costing as ____ is to variable costing.

Figure 8-5. Sanders Company has the following information for 2011: There were no beginning inventories. Refer to Figure 8-5.What is the value of ending inventory for Sanders using the absorption costing method?

Baker Company produced 30,000 units and sold 28,000 units in 2011.Beginning inventory was zero.During the period,the following costs were incurred: Required: Compute the dollar amount of ending inventory using:

Figure 8-1. Last year,Fabre Company produced 20,000 units and sold 18,000 units at a price of $12.Costs for last year were as follows: Fixed factory overhead is applied based on expected production.Last year,Fabre expected to produce 20,000 units. Refer to Figure 8-1.What is operating income for last year under variable costing?

On a segmented income statement,fixed costs are broken down into direct fixed costs and common fixed costs.

The ___________________ income statement groups expenses according to function.

Total inventory-related cost consists of ordering cost and carrying cost.

Simon Company sells 900 units of its deluxe product each year.The cost of setting up for one production run is $150; the cost of carrying one unit in inventory for a year is $3.

List three problems inventory was meant to solve.How does the JIT producer handle these problems? Problems with inventory: 1.Ordering costs 2.Uncertainty in demand 3.Lower cost of inventory

Variable costing and absorption costing income statements may differ because of their treatment of fixed factory overhead.

JIT responds to the problems traditionally solved by carrying inventories by

For internal reporting ________________ is an important managerial tool because it provides vital cost information for decision making and control.

A disadvantage of absorption costing is

Generally Accepted Accounting Principles (GAAP)require the use of which accounting method for external reporting?