Question 1

In the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit.

Accepted Answer

A) True 
 B)False  False

Question 2

A change in the amount of sales can be due to either a change in the units sold or a change in price or both.

Accepted Answer

A) True 
 B)False  True

Question 3

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each), the effect of the quantity factor on the change in contribution margin is:

Accepted Answer

A)  $10,800 decrease 
B)  $10,800 increase 
C)  $10,000 increase 
D)  $10,000 decrease 
A)  $10,800 decrease 
B)  $10,800 increase 
C)  $10,000 increase 
D)  $10,000 decrease A

Question 4

Which of the following would not be an appropriate activity base for cost analysis in a service firm?

Accepted Answer

A)  lawns mowed 
B)  inventory produced 
C)  customers served 
D)  haircuts given 
A)  lawns mowed 
B)  inventory produced 
C)  customers served 
D)  haircuts given

Question 5

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 6

Fixed costs are $50 per unit and variable costs are $125 per unit. Production was 130,000 units, while sales were 125,000 units. Determine a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and b) the difference in variable costing and absorption costing income from operations.

Accepted Answer

a)Variable costing income from

Question 7

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 8

In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in unit sales price or cost, is termed the quantity factor.

Accepted Answer

A) True 
 B)False

Question 9

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each), the effect of the quantity factor on the change in sales is:

Accepted Answer

A)  $20,500 increase 
B)  $20,000 decrease 
C)  $20,500 decrease 
D)  $20,000 increase 
A)  $20,500 increase 
B)  $20,000 decrease 
C)  $20,500 decrease 
D)  $20,000 increase

Question 10

Which of the following is not true when determining the selling price for a product?

Accepted Answer

A)  Absorption costing should be used to determine routine pricing which includes both fixed and variable costs. 
B)  As long as the selling price is set above the variable costs, the company will make a profit in short run. 
C)  Variable costing is effective when determining short run decisions, but absorption costing is only used for long-term pricing policies. 
D)  Both variable and absorption pricing plans should be considered, to include several pricing alternatives. 
A)  Absorption costing should be used to determine routine pricing which includes both fixed and variable costs. 
B)  As long as the selling price is set above the variable costs, the company will make a profit in short run. 
C)  Variable costing is effective when determining short run decisions, but absorption costing is only used for long-term pricing policies. 
D)  Both variable and absorption pricing plans should be considered, to include several pricing alternatives.

Question 11

The contribution margin and the manufacturing margin are usually equal.

Accepted Answer

A) True 
 B)False

Question 12

MATCHING
-Operating income is impacted by changes in inventory level.

Accepted Answer

A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing 
A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing

Question 13

In contribution margin analysis, the quantity factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

Accepted Answer

A) True 
 B)False

Question 14

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Accepted Answer

A) True 
 B)False

Question 15

The level of inventory of a manufactured product has increased by 7,000 units during a period. The following data are also available:   What would be the effect on income from operations if absorption costing is used rather than variable costing?

Accepted Answer

A)  $42,000 decrease 
B)  $42,000 increase 
C)  $52,500 increase 
D)  $52,500 decrease 
A)  $42,000 decrease 
B)  $42,000 increase 
C)  $52,500 increase 
D)  $52,500 decrease

Question 16

On the variable costing income statement, variable costs are deducted from contribution margin to yield manufacturing margin.

Accepted Answer

A) True 
 B)False

Question 17

On what effects does contribution margin analysis focus?

Accepted Answer

A)  the quantity factor 
B)  the unit cost factor 
C)  the unit sales price factor 
D)  all of the above 
A)  the quantity factor 
B)  the unit cost factor 
C)  the unit sales price factor 
D)  all of the above

Question 18

Which of the following causes the difference between the planned and actual contribution margin?

Accepted Answer

A)  an increase or decrease in the amount of sales 
B)  an increase in the amount of variable costs and expenses 
C)  a decrease in the amount of variable costs and expenses 
D)  all of the above 
A)  an increase or decrease in the amount of sales 
B)  an increase in the amount of variable costs and expenses 
C)  a decrease in the amount of variable costs and expenses 
D)  all of the above

Question 19

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.

Accepted Answer

A) True 
 B)False

Question 20

Sales mix is generally defined as the relative distribution of sales among the various products sold.

Accepted Answer

A) True 
 B)False

Exam 20: Variable Costing for Management Analysis

In the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit.

A change in the amount of sales can be due to either a change in the units sold or a change in price or both.

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each), the effect of the quantity factor on the change in contribution margin is:

Which of the following would not be an appropriate activity base for cost analysis in a service firm?

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in unit sales price or cost, is termed the quantity factor.

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each), the effect of the quantity factor on the change in sales is:

Which of the following is not true when determining the selling price for a product?

The contribution margin and the manufacturing margin are usually equal.

MATCHING -Operating income is impacted by changes in inventory level.

In contribution margin analysis, the quantity factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

The level of inventory of a manufactured product has increased by 7,000 units during a period. The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

On the variable costing income statement, variable costs are deducted from contribution margin to yield manufacturing margin.

On what effects does contribution margin analysis focus?

Which of the following causes the difference between the planned and actual contribution margin?

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.

Sales mix is generally defined as the relative distribution of sales among the various products sold.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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