Exam 5: Variable Costing

Variable costing income is more useful for decision making because costs are separated by function.

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. There was no beginning inventory. What is the value of ending inventory using full costing?

Cold City Blowers produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct material per unit \ 22 Direct labor per unit 15 Variable manufacturing overhead per unit 6 Fixed manufacturing overhead per year 23,400 In addition, the company has fixed selling and administrative costs of $9,360 per year. During the year, Cold City Blowers produced 780 snow blowers and sold 800 snow blowers. Beginning inventory consisted of 50 snow blowers. How much is net income using variable costing?

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. There was no beginning inventory. How much is the cost of goods sold using full costing?

In variable costing, fixed manufacturing overhead is considered a period cost.

Absorption costing is required for external reporting under generally accepted accounting principles.

Meow Foods had 2,000 25-pound bags of cat food in beginning inventory. During 2014, the company manufactured 16,000 bags and sold 15,000 units. Each bag of food is sold for $17. Assume the same unit costs in all years. The company experienced the following costs: Direct materials $4.50 per unit Direct labor $2.10 per unit Variable manufacturing overhead $1.90 per unit Variable selling $1.00 per unit Fixed manufacturing overhead $48,000 Fixed selling $24,000 Fixed administrative $30,000 If the company uses variable costing, at what amount is the ending inventory for the year valued?

Waterloo Skyline experienced the following costs in 2014: Direct materials \ 3.15 per unit Direct labor \ 2.80 per unit Variable manufacturing overhead \ 1.45 per unit Fixed manufacturing overhead \ 12.60 per unit There was no beginning inventory. During the year, the company sold 190,000 units. If net income using full and variable costing was $939,020 and $905,000, respectively, how many units did the company produce in 2014?

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 full costing. How much will the company's gross margin increase if sales increase 10%?

During the past year, Waxman Electronics manufactured 25,000 speakers during 2014 and sold 26,000 speakers. Production costs during the year were as follows: Fixed manufacturing overhead \ 546,000 Variable manufacturing overhead 234,000 Direct labor 312,000 Direct materials 780,000 Sales totaled $3,120,000, variable selling and administrative costs totaled $182,000, and fixed selling and administrative costs totaled $114,000. There were 2,200 speakers in beginning inventory. How much is the contribution margin per unit?

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 full costing?

Which of the following items appears on a variable costing income statement but not on a full costing income statement?

The total amount reported on an income statement for selling and administrative expenseis the same amount regardless if variable of full costing is used. .

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 the cost of ending inventory under variable costing?

Which of the following is accounted for differently in full costing compared to variable costing?

Macho Enterprises experienced the following costs in 2014: Direct materials \ 2.65 per unit Direct labor \ 1.80 per unit Variable manufacturing overhead \ 3.25 per unit Variable selling \ 1.15 per unit Fixed manufacturing overhead \ 94,000 Fixed selling \ 35,000 Fixed administrative \ 10,000 During the year, the company manufactured 47,000 units and sold 40,000 units. How much is the unit product cost using full costing?

Under full costing, ending inventory includes both fixed and variable manufacturing and nonmanufacturing costs.

Absorption costing is another name for variable costing.

Full costing

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 many units will remain in inventory at the end of February?