Exam 5: Variable Costing

Beiber Boxers contribution income statement utilizing variable costing for 2014 appears below: Sales ( \1 2 per unit) \7 8,000 Less variable costs: Cost of goods sold \2 6,000 Selling \& administrative 9,750 35,750 Contribution margin 42,250 Less fixed costs: Manufacturing overhead 12,600 Selling \& administrative costs 14,950 27,550 Net income \1 4,700 The company produced 7,000 units during the year. Variable and fixed production costs have remained constant the entire year. There were no beginning inventories. How much is the dollar value of the ending inventory using full costing?

Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years): Sales in units 5,800 Production in units 6,200 Beginning inventory 1,500 Variable production cost per unit \ 46.00 Variable selling cost per unit \ 6.00 Fixed production cost per year \ 31,000 Fixed selling and administrative cost per year \ 24,000 Selling price per unit \ 75.00 How much is net income for the year under full costing?

Which of the following is accounted for as a product cost in variable costing?

Variable costing income is a function of

Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct material per unit \2 0 Direct labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year 148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers. Beginning inventory consists of no units. How much fixed manufacturing overhead is in ending inventory under full costing?

Income statements of manufacturing firms prepared for external purposes use variable costing because it provides higher profits for making decisions.

Under full costing, all fixed costs of production are included in Finished Goods Inventory and remain there until all inventory units are sold.

Affinity makes a single product, pool pumps. Information for 2014 appears below (Assume the same unit costs in all years): Sales in units 5,800 Production in units 6,200 Beginning inventory 1,500 Variable production cost per unit \ 46.00 Variable selling cost per unit \ 6.00 Fixed production cost per year \ 31,000 Fixed selling and administrative cost per year \ 24,000 Selling price per unit \ 75.00 Under which method will net income be larger?

Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these calculators at a price of $10.00 each. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled $24,000. Beginning inventory consists of no units. What is Brand Products' net income using variable costing?

If a company's levels of total fixed costs and unit variable costs remain unchanged from one year to the next, under which costing method is it possible for managers to manipulate net income through production?

If a company has no fixed costs, variable costing income will equal full costing income, regardless of any increase or decrease in inventory levels during the period.

The Crab Shack experienced the following costs in 2014 (Assume the same unit costs in all years): Direct materials \ 2.25 per unit Direct labor \ 1.50 per unit Manufacturing overhead costs Variable \ 1.10 per unit Fixed \ 60,000 Selling \& administrative costs Variable selling \ 0.80 per unit Fixed selling \ 9,000 Fixed administrative \ 13,000 There were 1,800 units in beginning inventory. During the year, the company manufactured 24,000 units and sold 25,000 units. If net income using variable costing was $76,250, how much is net income using full costing?

When the number of units produced is greater than the number of units sold, variable costing yields higher income than full costing.

Futon Delight experienced the following costs in 2014 (Assume the same unit costs in all years): Direct materials \ 2.00 per unit Direct labor \ 1.00 per unit Manufacturing overhead costs Variable \ 1.50 per unit Fixed \4 5,000 There were 600 units in beginning inventory. During the year, the company manufactured 18,000 units and sold 17,600 units. If net income for the year was $54,000 using full costing, how much will net income be if the company uses variable costing?

A company with fixed manufacturing costs of $500,000 produces 100,000 units in 2014 and 125,000 units in 2015. The company sells 90,000 units each in both years. Other costs and selling price are unchanged for 2014 and 2015. Assume that there was no beginning inventory in 2014. Which of the following is true?

Brislin Gifts makes ceramic mugs and has the following amounts during 2014 (Assume the same unit costs in all years): Selling price \ 9.00 per mug Variable production cost \ 2.50 per mug Variable selling cost \ 1.10 per mug Fixed production cost \ 100,000 per year Fixed selling and administrative cost \ 60,000 per year Production and sales in units for the first three months of 2014 are as follows: Year Production Sales January 50,000 44,000 February 40,000 45,000 March 50,000 45,000 Inventory at January 1, 2014 consisted of 1,000 mugs. How much is the inventory cost per unit under variable costing during March?

Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these calculators at a price of $10.00 each. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled $24,000. Beginning inventory consists of no units. Brand Products uses variable costing. How much will the company's contribution margin increase if sales increase 10%?

Brislin Gifts makes ceramic mugs and has the following amounts during 2014 (Assume the same unit costs in all years): Selling price \ 9.00 per mug Variable production cost \ 2.50 per mug Variable selling cost \ 1.10 per mug Fixed production cost \ 100,000 per month Fixed selling and administrative cost \ 60,000 per month Production and sales in units for the first three months of 2014 are as follows: Year Production Sales January 50,000 44,000 February 40,000 45,000 March 50,000 45,000 Inventory at January 1, 2014 consisted of 1,000 mugs. During which months will ending inventory be the same if variable costing is used?

During periods in which inventory levels increase, sales revenue will be larger when using full costing than if variable costing is used.

If the number of units sold is equal to the number of units produced, then contribution margin will equal gross margin.