Question 1

MATCHING
-Treats fixed selling cost as a period cost.

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 2

In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:

Accepted Answer

A)  differential margin 
B)  contribution margin 
C)  gross profit 
D)  marginal expenses 
A)  differential margin 
B)  contribution margin 
C)  gross profit 
D)  marginal expenses

Question 3

S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the manufactured product remained unchanged. The manufacturing costs were as follows:   Which of the following statements is true?

Accepted Answer

A)  Net income will be the same under both variable and absorption costing. 
B)  Net income under variable costing will be $45,000 less than net income under absorption costing 
C)  Net income under absorption costing will be $40,000 more than under variable costing. 
D)  The difference in net income cannot be determined. 
A)  Net income will be the same under both variable and absorption costing. 
B)  Net income under variable costing will be $45,000 less than net income under absorption costing 
C)  Net income under absorption costing will be $40,000 more than under variable costing. 
D)  The difference in net income cannot be determined.

Question 4

MATCHING
-Required by generally accepted accounting principles.

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 5

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 unit cost factor on the change in contribution margin is:

Accepted Answer

A)  $6,400 decrease 
B)  $6,400 increase 
C)  $7,200 increase 
D)  $7,200 decrease 
A)  $6,400 decrease 
B)  $6,400 increase 
C)  $7,200 increase 
D)  $7,200 decrease

Question 6

Management will use both variable and absorption costing in all of the following activities except:

Accepted Answer

A)  controlling costs 
B)  product pricing 
C)  production planning 
D)  controlling inventory levels 
A)  controlling costs 
B)  product pricing 
C)  production planning 
D)  controlling inventory levels

Question 7

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the unit price or unit cost factor.

Accepted Answer

A) True 
 B)False

Question 8

The level of inventory of a manufactured product has increased by 4,000 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)  $44,000 decrease 
B)  $44,000 increase 
C)  $64,000 increase 
D)  $64,000 decrease 
A)  $44,000 decrease 
B)  $44,000 increase 
C)  $64,000 increase 
D)  $64,000 decrease

Question 9

Another name for variable costing is:

Accepted Answer

A)  indirect costing 
B)  process costing 
C)  direct costing 
D)  differential costing 
A)  indirect costing 
B)  process costing 
C)  direct costing 
D)  differential costing

Question 10

Under variable costing, which of the following costs would be included in finished goods inventory?

Accepted Answer

A)  neither variable nor fixed factory overhead cost 
B)  both variable and fixed factory overhead cost 
C)  only variable factory overhead cost 
D)  only fixed factory overhead cost 
A)  neither variable nor fixed factory overhead cost 
B)  both variable and fixed factory overhead cost 
C)  only variable factory overhead cost 
D)  only fixed factory overhead cost

Question 11

In the short run, the selling price of a product should normally not be less than the variable costs and expenses of making and selling it.

Accepted Answer

A) True 
 B)False

Question 12

Contribution margin reporting can be beneficial for analyzing which of the following?

Accepted Answer

A)  sales personnel 
B)  products 
C)  sales territory 
D)  all of the above 
A)  sales personnel 
B)  products 
C)  sales territory 
D)  all of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?

Accepted Answer

A)  Standard costing 
B)  Variable costing 
C)  Absorption costing 
D)  Marginal costing 
A)  Standard costing 
B)  Variable costing 
C)  Absorption costing 
D)  Marginal costing

Question 15

During the first year of operations, 18,000 units were manufactured and 13,500 units were sold. On August 31, Olympic Inc. prepared the following income statement based on the variable costing concept:
Olympic Inc.
Variable Costing Income Statement
For Year Ended August 31, 20--   Determine the unit cost of goods manufactured, based on a) the variable costing concept and b) the absorption costing concept.

Accepted Answer

a) $16.00 $288,000 total variable cost o

Question 16

The systematic examination of differences between planned and actual contribution margins is termed contribution margin analysis.

Accepted Answer

A) True 
 B)False

Question 17

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields manufacturing margin.

Accepted Answer

A) True 
 B)False

Question 18

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields gross profit.

Accepted Answer

A) True 
 B)False

Question 19

For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will equal the income from operations reported under variable costing.

Accepted Answer

A) True 
 B)False

Question 20

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 unit price or unit cost factor.

Accepted Answer

A) True 
 B)False

Exam 20: Variable Costing for Management Analysis

MATCHING -Treats fixed selling cost as a period cost.

In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:

S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the manufactured product remained unchanged. The manufacturing costs were as follows: Which of the following statements is true?

MATCHING -Required by generally accepted accounting principles.

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 unit cost factor on the change in contribution margin is:

Management will use both variable and absorption costing in all of the following activities except:

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the unit price or unit cost factor.

The level of inventory of a manufactured product has increased by 4,000 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?

Another name for variable costing is:

Under variable costing, which of the following costs would be included in finished goods inventory?

In the short run, the selling price of a product should normally not be less than the variable costs and expenses of making and selling it.

Contribution margin reporting can be beneficial for analyzing which of the following?

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

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?

The systematic examination of differences between planned and actual contribution margins is termed contribution margin analysis.

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields manufacturing margin.

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields gross profit.

For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will equal the income from operations reported under variable 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 unit price or unit cost factor.

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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