Question 1

In variable costing, fixed costs do not become part of the cost of goods manufactured, but are considered an expense of the period.

Accepted Answer

A) True 
 B)False

Question 2

Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory.

Accepted Answer

A) True 
 B)False

Question 3

The relative distribution of sales among various products sold is referred to as the:

Accepted Answer

A)  by-product mix 
B)  joint product mix 
C)  profit mix 
D)  sales mix 
A)  by-product mix 
B)  joint product mix 
C)  profit mix 
D)  sales mix

Question 4

A business operated at 100% of capacity during its first month and incurred the following costs:   If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement?

Accepted Answer

A)  $51,400 
B)  $52,000 
C)  $54,000 
D)  $53,000 
A)  $51,400 
B)  $52,000 
C)  $54,000 
D)  $53,000

Question 5

For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

Accepted Answer

A) True 
 B)False

Question 6

The beginning inventory is 5,000 units. All of the units manufactured during the period and 3,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $25 per unit, and variable costs are $55 per unit. 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 income from operations.

Accepted Answer

a)Variable costing income from

Question 7

On the variable costing income statement, the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 8

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each), the effect of the unit cost factor on the change in contribution margin is:

Accepted Answer

A)  $12,000 increase 
B)  $5,750 decrease 
C)  $12,000 decrease 
D)  $5,750 increase 
A)  $12,000 increase 
B)  $5,750 decrease 
C)  $12,000 decrease 
D)  $5,750 increase

Question 9

Presented below are the major categories or captions that would appear on an income statement prepared in the variable costing format:
Contribution margin Fixed costs
Income from operations Manufacturing margin Sales
Variable cost of goods sold
Variable selling and administrative expenses
a) Arrange the above captions in the proper order in accordance with the variable costing concept.
b) Which of the captions represents 1) the difference between sales and the total of all the variable costs and expenses and 2) the remaining amount of revenue available for fixed manufacturing costs, fixed expenses, and net income?

Accepted Answer

a)Sales
Variable cost of goods sold
Manu

Question 10

The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured:

Accepted Answer

A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold 
A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold

Question 11

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available:   What would be the effect on income from operations if variable costing is used rather than absorption costing?

Accepted Answer

A)  $80,000 decrease 
B)  $80,000 increase 
C)  $104,000 decrease 
D)  $104,000 increase 
A)  $80,000 decrease 
B)  $80,000 increase 
C)  $104,000 decrease 
D)  $104,000 increase

Question 12

If sales totaled $200,000 for the current year 10,000 units at $20 each) and planned sales totaled $212,500 12,500 units at $17 each), the effect of the unit price factor on the change in sales is a:

Accepted Answer

A)  $30,000 increase 
B)  $12,500 increase 
C)  $7,500 increase 
D)  $30,000 decrease 
A)  $30,000 increase 
B)  $12,500 increase 
C)  $7,500 increase 
D)  $30,000 decrease

Question 13

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

Accepted Answer

A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold 
A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold

Question 14

Companies prepare contribution margin reports by market segments and product segments because products contribute to profitability in various ways.

Accepted Answer

A) True 
 B)False

Question 15

Edna's Chocolates had planned to sell chocolate covered strawberries for $3.00 each. Due to various factors, the actual price was $2.75. Edna's was able to sell 1,000 more strawberries than the anticipated 4,000. What is 1) the quantity factor and 2) the price factor for sales?

Accepted Answer

A)  1) $3,000, 2) $1,250) 
B)  1) $3,000, 2) $3,000) 
C)  1) $1,250, 2) $3,000 
D)  1) $4,000) 2) $3,000) 
A)  1) $3,000, 2) $1,250) 
B)  1) $3,000, 2) $3,000) 
C)  1) $1,250, 2) $3,000 
D)  1) $4,000) 2) $3,000)

Question 16

Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales were 12,000 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 17

MATCHING
-Includes gross profit on the income statement.

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 18

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 unit price factor on the change in sales is:

Accepted Answer

A)  $19,500 decrease 
B)  $19,500 increase 
C)  $20,000 decrease 
D)  $20,000 increase 
A)  $19,500 decrease 
B)  $19,500 increase 
C)  $20,000 decrease 
D)  $20,000 increase

Question 19

Service firms can only have one activity base for analyzing changes in costs.

Accepted Answer

A) True 
 B)False

Question 20

For short-run production planning, information in the variable costing format is more useful to management than is information in the absorption costing concept format.

Accepted Answer

A) True 
 B)False

Exam 20: Variable Costing for Management Analysis

In variable costing, fixed costs do not become part of the cost of goods manufactured, but are considered an expense of the period.

Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory.

The relative distribution of sales among various products sold is referred to as the:

For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

On the variable costing income statement, the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each), the effect of the unit cost factor on the change in contribution margin is:

The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured:

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: What would be the effect on income from operations if variable costing is used rather than absorption costing?

If sales totaled $200,000 for the current year 10,000 units at $20 each) and planned sales totaled $212,500 12,500 units at $17 each), the effect of the unit price factor on the change in sales is a:

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

Companies prepare contribution margin reports by market segments and product segments because products contribute to profitability in various ways.

Edna's Chocolates had planned to sell chocolate covered strawberries for $3.00 each. Due to various factors, the actual price was $2.75. Edna's was able to sell 1,000 more strawberries than the anticipated 4,000. What is 1) the quantity factor and 2) the price factor for sales?

MATCHING -Includes gross profit on the income statement.

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 unit price factor on the change in sales is:

Service firms can only have one activity base for analyzing changes in costs.

For short-run production planning, information in the variable costing format is more useful to management than is information in the absorption costing concept format.

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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