Leesburg Bags produces backpacks. The costs and prices for the backpacks follow (Assume the same unit costs in all years): $\begin{array}{lr} \text { Selling price }&\$ 23.00 \text { per backpack }\\ \text { Variable costs: }\\ \text { Production } & \$ 11.00 \text { per backpack } \\ \text { Selling } & \$ 2.00 \text { per backpack }\\ \text { Fixed Costs: }\\ \text { Production }&\$ 900,000 \text { per Year }\\ \text { Selling and administrative }&\$540,000 \text { per Year } \end{array}$ 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. What would be the difference in income between variable costing income and full costing income if the company had produced 215,000 backpacks instead of 250,000?

A) $62,791 B) $54,000 C) $46,400 D) $77,400 A) $62,791 B) $54,000 C) $46,400 D) $77,400

Diecast Tools' manufacturing costs for 2014 are as follows: $\begin{array}{lr} \text { Direct materials } & \$ 100,000 \\ \text { Direct labor } & 120,000 \\ \text { Depreciation of factory equipment } & 30,000 \\ \text { Production supervisor's salary } & 72,000 \\ \text { Other fixed manufacturing overhead } & 50,000 \end{array}$ What amount should be considered product costs for external reporting purposes?

A) $220,000 B) $293,000 C) $402,000 D) $372,000 A) $220,000 B) $293,000 C) $402,000 D) $372,000

Rango Enterprises' manufacturing costs for 2014 are as follows: \[\begin{array} { l r } \text { Direct materials } & \$ 65,000 \\ \text { Direct labor } & 118,000 \\ \text { Manufacturing supplies } & 9,000 \\ \text { Depreciation of factory equipment } & 22,000 \\ \text { Other fixed manufacturing overhead } & 43,000 \end{array}\] What amount should be considered as product costs for external reporting purposes?

A) $183,000 B) $192,000 C) $257,000 D) $248,000 A) $183,000 B) $192,000 C) $257,000 D) $248,000

Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: $\begin{array}{lr}\text { Direct material per unit }&\$20\\ \text { Direct labor per unit } & 12 \\ \text { Variable manufacturing overhead per unit } & 10 \\ \text { Fixed manufacturing overhead per year } & 148,500 \end{array}$ 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 variable costing?

A) $679,500 B) $630,000 C) $652,500 D) $780,000 A) $679,500 B) $630,000 C) $652,500 D) $780,000

Roger Excavating Company experienced the following costs in 2014: $\begin{array}{lr} \text { Direct materials } & \$ 1.75 \text { per unit } \\ \text { Direct labor } & \$ 2.00 \text { per unit } \\ \text { Variable manufacturing overhead } & \$ 2.50 \text { per unit } \\ \text { Variable selling } & \$ 0.75 \text { per unit } \\ \text { Fixed manufacturing overhead } & \$ 50,000 \\ \text { Fixed selling } & \$ 15,000 \\ \text { Fixed administrative } & \$ 5,000 \end{array}$ During 2014, the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65, what is the amount of the company's contribution margin per unit?

A) $16.40 B) $15.65 C) $18.90 D) $13.65 A) $16.40 B) $15.65 C) $18.90 D) $13.65

Brislin Gifts makes ceramic mugs and has the following amounts during 2014 (Assume the same unit costs in all years): \[\begin{array}{l} \begin{array} { l r } \text { Selling price } & \$ 9.00 \text { per mug } \\ \text { Variable production cost } & \$ 2.50 \text { per mug } \\ \text { Variable selling cost } & \$ 1.10 \text { per mug } \\ \text { Fixed production cost } & \$ 100,000 \text { per month } \end{array}\\ \text { Fixed selling and administrative cost } \quad \$ 60,000 \text { per month } \end{array}\] Production and sales in units for the first three months of 2014 are as follows: $\begin{array}{lll}\text { Year }&\text {Production }&\text {Sales }\\ \text { January } & 50,000 & 44,000 \\ \text { February } & 40,000 & 45,000 \\ \text { March } & 50,000 & 45,000 \end{array}$ Inventory at January 1, 2014 consisted of 1,000 mugs. Which two months would have the same net income under full costing?

A) January and February B) February and March C) January and March D) No two months would have the same net income. A) January and February B) February and March C) January and March D) No two months would have the same net income.

Leesburg Bags produces backpacks. The costs and prices for the backpacks follow (Assume the same unit costs in all years): $\begin{array}{lr} \text { Selling price }&\$ 23.00 \text { per backpack }\\ \text { Variable costs: }\\ \text { Production } & \$ 11.00 \text { per backpack } \\ \text { Selling } & \$ 2.00 \text { per backpack }\\ \text { Fixed Costs: }\\ \text { Production }&\$ 900,000 \text { per Year }\\ \text { Selling and administrative }&\$540,000 \text { per Year } \end{array}$ 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 higher or lower will variable costing be than full costing income?

A) $180,000 higher B) $320,000 higher C) $320,000 lower D) $180,000 lower A) $180,000 higher B) $320,000 higher C) $320,000 lower D) $180,000 lower

A) more useful for decision making than variable costing because it treats all costs of production as an inventory cost. B) required for financial reporting under generally accepted accounting principles. C) less likely to enable managers to manipulate income by increasing production. D) based on cost behavior. A) more useful for decision making than variable costing because it treats all costs of production as an inventory cost. B) required for financial reporting under generally accepted accounting principles. C) less likely to enable managers to manipulate income by increasing production. D) based on cost behavior.

Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for 2014: $\begin{array}{ll} \text { Selling price }& \$ 15.00 \text { per } t \text {-shirt } \\ \text { Variable costs: }\\ \text { Production (manufacturing costs) } & \$ 3.00 \text { per } t \text {-shirt } \\ \text { Selling \& administration } & \$ 1.00 \text { per } t \text {-shirt }\\ \text { Fixed costs: }\\ \text { Production (manufacturing costs) } & \$ 1,000,000 \text { per year } \\ \text { Selling \& administration } & \$ 2,000,000 \text { per year } \end{array}$ 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 inventory under full costing at December 31, 2014?

A) $150,000 B) $275,000 C) $200,000 D) $325,000 A) $150,000 B) $275,000 C) $200,000 D) $325,000

Sol Enterprises' contribution income statement utilizing variable costing appears below: Sol Enterprises Income Statement For the Year ended December 31, 2014 $\begin{array}{ll} \text { Sales (\$12 per unit) }&&\$240,000\\ \text { Less variable costs: }\\ \text { Cost of goods sold }&\$100,000\\ \text { Selling \& administrative }&18,000&118,000\\ \text { Contribution margin }&&122,000\\ \text { Less fixed costs: }\\ \text { Manufacturing overhead } & 60,900& \\ \text { Selling \& administrative costs } & 15,000 & 75,900\\ \text { Net income }&&\$46,100 \end{array}$ Sol produced 21,000 units during the year. Variable costs per unit 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 variable costing?

A) $5,000 B) $7,900 C) $8,800 D) $2,900 A) $5,000 B) $7,900 C) $8,800 D) $2,900

Radial Fuel Cells experienced the following costs in 2014 (Assume the same unit costs in all years): $\begin{array}{lr} \text { Direct materials }&\$ 4 \text { per unit }\\ \text { Direct labor }&\$ 8 \text { per unit }\\ \text { Manufacturing Overhead Costs }\\ \text { Variable } & \$ 2 \text { per unit } \\ \text { Fixed } & \$ 150,000\\ \text { Selling \& Administrative Costs }\\ \text { Fixed selling } & \$ 30,000 \\ \text { Variable selling } & \$ 1 \text { per unit } \\ \text { Fixed administrative } & \$ 20,000 \end{array}$ During the year, the company manufactured 50,000 units and sold 45,000 units. Beginning inventory is zero. If net income for the year was $265,000 using full costing, what would net income be if the company used variable costing?

A) $250,000 B) $265,000 C) $270,000 D) $450,000 A) $250,000 B) $265,000 C) $270,000 D) $450,000

Exam 5: Variable Costing

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. What would be the difference in income between variable costing income and full costing income if the company had produced 215,000 backpacks instead of 250,000?

(Multiple Choice)

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Question 81

Diecast Tools' manufacturing costs for 2014 are as follows: Direct materials \ 100,000 Direct labor 120,000 Depreciation of factory equipment 30,000 Production supervisor's salary 72,000 Other fixed manufacturing overhead 50,000 What amount should be considered product costs for external reporting purposes?

(Multiple Choice)

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Question 82

Which of the following is true when units produced exceed units sold?

(Multiple Choice)

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Question 83

Rango Enterprises' manufacturing costs for 2014 are as follows: Direct materials \ 65,000 Direct labor 118,000 Manufacturing supplies 9,000 Depreciation of factory equipment 22,000 Other fixed manufacturing overhead 43,000 What amount should be considered as product costs for external reporting purposes?

(Multiple Choice)

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Question 84

If a company employs JIT inventory techniques, which statement is true?

(Multiple Choice)

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Question 85

Robley Company's fixed manufacturing overhead costs totaled $235,000 and fixed corporate operating costs totaled $116,000. Under full costing, how should these costs be classified? Period Costs Product Costs A. \ 235,000 \ 116,000 B. \ 0 \ 351,000 C. \ 351,000 \ 0 D. \ 116,000 \ 235,000

(Short Answer)

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Question 86

If the number of units sold is greater than the number of units produced,

(Multiple Choice)

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Question 87

Under variable costing, net income can be increased by increasing production without increasing sales.

(True/False)

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Question 88

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 variable costing?

(Multiple Choice)

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Question 89

Roger Excavating Company experienced the following costs in 2014: Direct materials \ 1.75 per unit Direct labor \ 2.00 per unit Variable manufacturing overhead \ 2.50 per unit Variable selling \ 0.75 per unit Fixed manufacturing overhead \ 50,000 Fixed selling \ 15,000 Fixed administrative \ 5,000 During 2014, the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65, what is the amount of the company's contribution margin per unit?

(Multiple Choice)

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Question 90

Full costing income can be increased by decreasing production even though the additional inventory items will not be sold during the current period.

(True/False)

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Question 91

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. Which two months would have the same net income under full costing?

(Multiple Choice)

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Question 92

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

(Multiple Choice)

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Question 93

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 higher or lower will variable costing be than full costing income?

(Multiple Choice)

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Question 94

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

(Multiple Choice)

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Question 95

The cost of ending inventory using variable costing is always greater than or equal to full costing ending inventory.

(True/False)

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Question 96

Full costing is

(Multiple Choice)

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Question 97

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 inventory under full costing at December 31, 2014?

(Multiple Choice)

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Question 98

Sol Enterprises' contribution income statement utilizing variable costing appears below: Sol Enterprises Income Statement For the Year ended December 31, 2014 Sales ( \1 2 per unit) \2 40,000 Less variable costs: Cost of goods sold \1 00,000 Selling \& administrative 18,000 118,000 Contribution margin 122,000 Less fixed costs: Manufacturing overhead 60,900 Selling \& administrative costs 15,000 75,900 Net income \4 6,100 Sol produced 21,000 units during the year. Variable costs per unit 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 variable costing?

(Multiple Choice)

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Question 99

Radial Fuel Cells experienced the following costs in 2014 (Assume the same unit costs in all years): Direct materials \ 4 per unit Direct labor \ 8 per unit Manufacturing Overhead Costs Variable \ 2 per unit Fixed \ 150,000 Selling \& Administrative Costs Fixed selling \ 30,000 Variable selling \ 1 per unit Fixed administrative \ 20,000 During the year, the company manufactured 50,000 units and sold 45,000 units. Beginning inventory is zero. If net income for the year was $265,000 using full costing, what would net income be if the company used variable costing?

(Multiple Choice)

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Question 100

Which of the following is true when units produced exceed units sold?

If a company employs JIT inventory techniques, which statement is true?

Robley Company's fixed manufacturing overhead costs totaled $235,000 and fixed corporate operating costs totaled $116,000. Under full costing, how should these costs be classified? Period Costs Product Costs A. \ 235,000 \ 116,000 B. \ 0 \ 351,000 C. \ 351,000 \ 0 D. \ 116,000 \ 235,000

If the number of units sold is greater than the number of units produced,

Under variable costing, net income can be increased by increasing production without increasing sales.

Full costing income can be increased by decreasing production even though the additional inventory items will not be sold during the current period.

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

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

The cost of ending inventory using variable costing is always greater than or equal to full costing ending inventory.

Full costing is

Managerial Accounting in the Information Age

Job-Order Costing for Manufacturing and Service Companies

Process Costing

Cost-Volume-Profit Analysis

Cost Allocation and Activity-Based Costing

The Use of Cost Information in Management Decision Making

Pricing Decisions

Capital Budgeting Decisions

Budgetary Planning and Control

Standard Costs and Variance Analysis

Decentralization and Performance Evaluation

Statement of Cash Flows

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