Question 1

When production is greater than sales

Accepted Answer

A) net income under absorption costing will be greater than or less than net income under variable costing depending on the selling and administration costs. 
B) net income under absorption costing will be equal to net income under variable costing. 
C) net income under absorption costing will be less than net income under variable costing. 
D) net income under absorption costing will be greater than net income under variable costing. 
A) net income under absorption costing will be greater than or less than net income under variable costing depending on the selling and administration costs. 
B) net income under absorption costing will be equal to net income under variable costing. 
C) net income under absorption costing will be less than net income under variable costing. 
D) net income under absorption costing will be greater than net income under variable costing. D

Question 2

M&H's unit production cost under variable costing is $25, and $32 under absorption costing.Net income under variable costing was $250,000 and $187,000 under absorption costing last year.Production equalled 63,000 units.How many units did M&H sell?

Accepted Answer

A) 72,000 
B) 54,000 
C) 70,000 
D) 56,000 
A) 72,000 
B) 54,000 
C) 70,000 
D) 56,000 A

Question 3

EKP's unit production cost under variable costing is $5, and $7 under absorption costing.Net income under variable costing was $10,000 and $12,000 under absorption costing last year.EKP sold 15,000 units.How many units did it produce?

Accepted Answer

A) 16,000 
B) 14,000 
C) 17,000 
D) 13,000 
A) 16,000 
B) 14,000 
C) 17,000 
D) 13,000 A

Question 4

Under absorption costing, what amount of fixed overhead is deferred to a future period?

Accepted Answer

A) $70,000 
B) $75,000 
C) $225,000 
D) $300,000 
A) $70,000 
B) $75,000 
C) $225,000 
D) $300,000

Question 5

In income statements prepared under absorption costing and variable costing, where would you find the terms contribution margin and gross profit? $\quad $$\quad $$\quad $$\quad $$\begin{array}{llcc}
 \underline{  \text { Contribution margin } }&\quad\quad\quad\quad\quad  \underline{ \text { Gross profit } }\
\end{array}$
a)$\begin{array}{llcc}
  \text {in absorption-costing income statement  } &  \text {   in variable-costing income statement} \
\end{array}$
b)$\begin{array}{llcc}
  \text { in absorption-costing income statement  } &  \text {  in both income statements} \
\end{array}$
c)$\begin{array}{llcc}
  \text { in variable-costing income statement } &  \text {  in absorption-costing income statement } \
\end{array}$
d)$\begin{array}{llcc}
  \text { in both income statements  } &  \quad\quad\quad\quad\quad\text { In variable-costing income statement} \
\end{array}$

Accepted Answer

The answer of In income statements prepared under absorption costing...

Question 6

Use the following information for items 
Obama Company sells its product for $25 per unit.During 2020, it produced 20,000 units and sold 15,000 units (there was no beginning inventory).Costs per unit are: direct materials $5, direct labour $4, and variable overhead $3.Fixed costs are: $300,000 manufacturing overhead, and $50,000 selling and administrative expenses.
-Ending inventory under variable costing is

Accepted Answer

A) $60,000. 
B) $240,000. 
C) $360,000. 
D) $410,000. 
A) $60,000. 
B) $240,000. 
C) $360,000. 
D) $410,000.

Question 7

When absorption costing is used

Accepted Answer

A) for external reporting, variable costing can still be used for internal reporting purposes. 
B) management may be tempted to overproduce in a given period in order to decrease net income. 
C) it facilitates cost-volume-profit analysis. 
D) and production exceeds sales, absorption costing reports a lower net income than variable costing. 
A) for external reporting, variable costing can still be used for internal reporting purposes. 
B) management may be tempted to overproduce in a given period in order to decrease net income. 
C) it facilitates cost-volume-profit analysis. 
D) and production exceeds sales, absorption costing reports a lower net income than variable costing.

Question 8

Which of the following terms would be found on an income statement using variable costing but never not on an income statement prepared using absorption costing?

Accepted Answer

A) contribution margin 
B) variable manufacturing overhead 
C) fixed manufacturing overhead 
D) gross profit 
A) contribution margin 
B) variable manufacturing overhead 
C) fixed manufacturing overhead 
D) gross profit

Question 9

Under absorption costing when inventory increases in a year,

Accepted Answer

A) there are more fixed costs charged to income. 
B) there are less fixed costs charged to income. 
C) fixed costs in inventory remain the same regardless of inventory changes. 
D) fixed costs in inventory are reduced. 
A) there are more fixed costs charged to income. 
B) there are less fixed costs charged to income. 
C) fixed costs in inventory remain the same regardless of inventory changes. 
D) fixed costs in inventory are reduced.

Question 10

Which of the following terms would be found on an income statement using absorption costing but not on an income statement prepared using variable costing?

Accepted Answer

A) contribution margin 
B) variable manufacturing overhead 
C) fixed manufacturing overhead 
D) gross profit 
A) contribution margin 
B) variable manufacturing overhead 
C) fixed manufacturing overhead 
D) gross profit

Question 11

A customer wants to purchase a large quantity of your product at a price below your normal selling price.You have a labour-intensive production process.Which of the following would be most helpful in assessing the offer?

Accepted Answer

A) throughput costing 
B) either variable or absorption costing 
C) absorption costing 
D) variable costing 
A) throughput costing 
B) either variable or absorption costing 
C) absorption costing 
D) variable costing

Question 12

How are fixed manufacturing costs handled under variable costing?

Accepted Answer

A) They are subtracted from the variable cost of goods sold to determine the ending inventory value that will be recorded on the Balance Sheet. 
B) They are not recorded, which is why variable costing is not used for external reporting. 
C) They are recorded directly on the Balance Sheet. 
D) They are treated as period costs. 
A) They are subtracted from the variable cost of goods sold to determine the ending inventory value that will be recorded on the Balance Sheet. 
B) They are not recorded, which is why variable costing is not used for external reporting. 
C) They are recorded directly on the Balance Sheet. 
D) They are treated as period costs.

Question 13

Which of the following statements about variable costing is true?

Accepted Answer

A) As manufacturing output increases, the per-unit manufacturing cost remains constant. 
B) As manufacturing output increases, the per-unit manufacturing cost decreases. 
C) As manufacturing output increases, the per-unit manufacturing cost increases. 
D) As manufacturing output increases, the change in the per-unit manufacturing cost is negated by the change in the per-unit selling cost. 
A) As manufacturing output increases, the per-unit manufacturing cost remains constant. 
B) As manufacturing output increases, the per-unit manufacturing cost decreases. 
C) As manufacturing output increases, the per-unit manufacturing cost increases. 
D) As manufacturing output increases, the change in the per-unit manufacturing cost is negated by the change in the per-unit selling cost.

Question 14

Under absorption costing

Accepted Answer

A) selling and administration overhead costs are inventoried. 
B) selling and administration overhead costs are expensed as incurred. 
C) only variable selling and administration costs are expensed while fixed selling and administration costs are inventoried. 
D) only fixed selling and administration costs are expensed while variable selling and administration costs are inventoried. 
A) selling and administration overhead costs are inventoried. 
B) selling and administration overhead costs are expensed as incurred. 
C) only variable selling and administration costs are expensed while fixed selling and administration costs are inventoried. 
D) only fixed selling and administration costs are expensed while variable selling and administration costs are inventoried.

Question 15

Under variable costing

Accepted Answer

A) only the quantity of products sold determines cost of goods sold. 
B) only the quantity of products produced determines cost of goods sold. 
C) both the quantity of products produced and sold determines cost of goods sold. 
D) neither the quantity of products produced or sold determines cost of goods sold. 
A) only the quantity of products sold determines cost of goods sold. 
B) only the quantity of products produced determines cost of goods sold. 
C) both the quantity of products produced and sold determines cost of goods sold. 
D) neither the quantity of products produced or sold determines cost of goods sold.

Question 16

Use the following information for items 
Obama Company sells its product for $25 per unit.During 2020, it produced 20,000 units and sold 15,000 units (there was no beginning inventory).Costs per unit are: direct materials $5, direct labour $4, and variable overhead $3.Fixed costs are: $300,000 manufacturing overhead, and $50,000 selling and administrative expenses.
-Cost of goods sold under absorption costing is

Accepted Answer

A) $180,000. 
B) $405,000. 
C) $442,500. 
D) $540,000. 
A) $180,000. 
B) $405,000. 
C) $442,500. 
D) $540,000.

Question 17

Management may be tempted to overproduce

Accepted Answer

A) when using variable costing, in order to increase net income. 
B) when using variable costing, in order to decrease net income. 
C) when using absorption costing, in order to increase net income. 
D) when using absorption costing, in order to decrease net income. 
A) when using variable costing, in order to increase net income. 
B) when using variable costing, in order to decrease net income. 
C) when using absorption costing, in order to increase net income. 
D) when using absorption costing, in order to decrease net income.

Question 18

When units sold exceeds units produced

Accepted Answer

A) net income under absorption costing is higher than net income under variable costing. 
B) net income under absorption costing is lower than net income under variable costing. 
C) net income under absorption costing equals net income under variable costing. 
D) the relationship between net income under absorption costing and net income under variable costing cannot be predicted. 
A) net income under absorption costing is higher than net income under variable costing. 
B) net income under absorption costing is lower than net income under variable costing. 
C) net income under absorption costing equals net income under variable costing. 
D) the relationship between net income under absorption costing and net income under variable costing cannot be predicted.

Question 19

The computation of absorption-costing gross profit always involves subtracting

Accepted Answer

A) all current-year fixed manufacturing overhead. 
B) some, but not all, current-year fixed manufacturing overhead. 
C) all fixed manufacturing overhead applied to units sold in the current year. 
D) no fixed manufacturing overhead. 
A) all current-year fixed manufacturing overhead. 
B) some, but not all, current-year fixed manufacturing overhead. 
C) all fixed manufacturing overhead applied to units sold in the current year. 
D) no fixed manufacturing overhead.

Question 20

When production exceeds sales

Accepted Answer

A) ending inventory under variable costing will exceed ending inventory under absorption costing. 
B) ending inventory under absorption costing will exceed ending inventory under variable costing. 
C) ending inventory under absorption costing will be equal to ending inventory under variable costing. 
D) ending inventory under absorption costing may either exceed, be equal to, or be less than ending inventory under variable costing. 
A) ending inventory under variable costing will exceed ending inventory under absorption costing. 
B) ending inventory under absorption costing will exceed ending inventory under variable costing. 
C) ending inventory under absorption costing will be equal to ending inventory under variable costing. 
D) ending inventory under absorption costing may either exceed, be equal to, or be less than ending inventory under variable costing.

When production is greater than sales

M&H's unit production cost under variable costing is $25, and $32 under absorption costing.Net income under variable costing was $250,000 and $187,000 under absorption costing last year.Production equalled 63,000 units.How many units did M&H sell?

EKP's unit production cost under variable costing is $5, and $7 under absorption costing.Net income under variable costing was $10,000 and $12,000 under absorption costing last year.EKP sold 15,000 units.How many units did it produce?

Under absorption costing, what amount of fixed overhead is deferred to a future period?

When absorption costing is used

Which of the following terms would be found on an income statement using variable costing but never not on an income statement prepared using absorption costing?

Under absorption costing when inventory increases in a year,

Which of the following terms would be found on an income statement using absorption costing but not on an income statement prepared using variable costing?

A customer wants to purchase a large quantity of your product at a price below your normal selling price.You have a labour-intensive production process.Which of the following would be most helpful in assessing the offer?

How are fixed manufacturing costs handled under variable costing?

Which of the following statements about variable costing is true?

Under absorption costing

Under variable costing

Management may be tempted to overproduce

When units sold exceeds units produced

The computation of absorption-costing gross profit always involves subtracting

When production exceeds sales

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 8: Alternative Inventory Costing Methods: a Decision-Making Perspective

When production is greater than sales

M&H's unit production cost under variable costing is $25, and $32 under absorption costing.Net income under variable costing was $250,000 and $187,000 under absorption costing last year.Production equalled 63,000 units.How many units did M&H sell?

EKP's unit production cost under variable costing is $5, and $7 under absorption costing.Net income under variable costing was $10,000 and $12,000 under absorption costing last year.EKP sold 15,000 units.How many units did it produce?

Under absorption costing, what amount of fixed overhead is deferred to a future period?

When absorption costing is used

Which of the following terms would be found on an income statement using variable costing but never not on an income statement prepared using absorption costing?

Under absorption costing when inventory increases in a year,

Which of the following terms would be found on an income statement using absorption costing but not on an income statement prepared using variable costing?

A customer wants to purchase a large quantity of your product at a price below your normal selling price.You have a labour-intensive production process.Which of the following would be most helpful in assessing the offer?

How are fixed manufacturing costs handled under variable costing?

Which of the following statements about variable costing is true?

Under absorption costing

Under variable costing

Management may be tempted to overproduce

When units sold exceeds units produced

The computation of absorption-costing gross profit always involves subtracting

When production exceeds sales

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters