Exam 5: Variable Costing

Cold City Blowers produces snow blowers. The selling price per snow blower is $80. Costs involved in production are: Direct material per unit \2 2 Direct labor per unit 15 Variable manufacturing overhead per unit 6 Fixed manufacturing overhead per year 206,400 In addition, the company has fixed selling and administrative costs of $88,000 per year. During the year, Cold City Blowers produced 8,600 snow blowers and sold 8,000 snow blowers. There is no beginning inventory. Ignoring taxes, how much will full costing net income differ from variable costing net income?

Leesburg Bags produces backpacks. The costs and prices for the backpacks follow (Assume the same unit costs in all years): Selling price \ 23.00 per backpack Variable costs: Production \ 11.00 per backpack Selling \ 2.00 per backpack Fixed Costs: Production \ 900,000 per Year Selling and administrative \5 40,000 per Year Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no beginning inventory, and costs throughout the year were stable. How much is net income under variable costing?

Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for 2014: Selling price \ 15.00 per t -shirt Variable costs: Production (manufacturing costs) \ 3.00 per t -shirt Selling \& administration \ 1.00 per t -shirt Fixed costs: Production (manufacturing costs) \ 1,000,000 per year Selling \& administration \ 2,000,000 per year During 2014, the company produced 400,000 t-shirts and sold 350,000 of them. Assume that there was no beginning inventory. How much is the net income under variable costing?

Zintec has fixed manufacturing costs of $400,000 and produces 10,000 and sells 8,000 wagons during the year. There is no beginning inventory. Which of the following conclusions can be drawn?

When the number of units produced exceeds the number of units sold, variable costing yields a lower net income than if full costing had been used.

In variable costing, when does fixed manufacturing overhead become an expense?

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 full costing during March?

The following information relates to Winslee Widgets during the company's first year of operations: Units produced 11,000 Units sold 10,000 Units in ending inventory 1,000 Fixed manufacturing overhead \ 220,000 How much fixed manufacturing overhead will be expensed during the year using full costing?

Ranger Roadsters experienced the following costs in 2014 (Assume the same unit costs in all years): Direct materials \ 4.85 per unit Direct labor \ 2.10 per unit Manufacturing overhead costs Variable \ 2.25 per unit Fixed \ 75,075 Selling \& administrative costs Variable selling \ 0.95 per unit Fixed selling \ 8,000 Fixed administrative \ 2,000 There were 6,000 units in beginning inventory. During the year, the company manufactured 45,500 units and sold 48,000 units. If net income using variable costing was $82,500, how much is net income 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 will be reported for inventory on the balance sheet if variable costing is used?

Anders Supply experienced the following costs in May: Direct materials \ 6.50 per unit Direct labor \ 2.20 per unit Manufacturing overhead costs Variable \ 3.10 per unit Fixed \ 44,000 Selling \& administrative costs Variable selling costs \ 1.50 per unit Fixed selling costs \ 21,000 Fixed admini strative costs \ 16,000 During May, the company manufactured 22,000 units and sold 24,000 units. Beginning inventory totaled 3,400 units. If the average selling price per unit was $28, how much is the company's contribution margin?

The following information relates to Charlin Industries for the year ending December 31, 2014, the company's first year of operations: Units produced 100,000 Units sold 80,000 Units in ending inventory 20,000 Fixed manufacturing overhead \ 650,000 How much fixed manufacturing overhead would be expensed in 2014 using variable costing?

A full costing income statement will display a higher net income than variable costing as long as inventory levels continue to increase.

Affinity makes a single product, pool pumps. Information for 2014 appears below: 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 the contribution margin per unit of inventory?

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 variable costing?

The use of variable costing encourages management of earnings by adjusting production volume.

When the number of units sold is equal to the number of units produced, the net income using absorption costing will be

In variable costing, which of the following will be included as part of inventory on a company's balance sheet?

Just-in-time (JIT) inventory management systems cause the difference between variable costing income and full costing income to be much greater than if standard inventory levels had been maintained by the company.

Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for 2014: Selling price \ 15.00 per t -shirt Variable costs: Production (manufacturing costs) \ 3.00 per t -shirt Selling \& administration \ 1.00 per t -shirt Fixed costs: Production (manufacturing costs) \ 1,000,000 per year Selling \& administration \ 2,000,000 per year During 2014, the company produced 400,000 t-shirts and sold 350,000 of them. Assume that there was no beginning inventory. How much is the net income under full costing?