Question 1

Under absorption costing:

Accepted Answer

A) Only direct variable manufacturing costs are inventoriable. 
B) Only direct fixed manufacturing costs are inventoriable. 
C) All manufacturing costs are inventoriable. 
D) No manufacturing costs are inventoriable. 
A) Only direct variable manufacturing costs are inventoriable. 
B) Only direct fixed manufacturing costs are inventoriable. 
C) All manufacturing costs are inventoriable. 
D) No manufacturing costs are inventoriable. C

Question 2

Use the following information for items 
Green Company sells its product for $11,000 per unit.Variable costs per unit are: manufacturing, $6,000; and selling and administrative, $125.Fixed costs are: $30,000 manufacturing overhead, and $40,000 selling and administrative.There was no beginning inventory at 1/1/10.Production was 20 units per year in 2010 - 2012.Sales were 20 units in 2010, 16 units in 2011, and 24 units in 2012.
-Income under absorption costing for 2011 is

Accepted Answer

A) $ 8,000. 
B) $14,000. 
C) $16,000. 
D) $22,000. 
A) $ 8,000. 
B) $14,000. 
C) $16,000. 
D) $22,000. B

Question 3

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. C

Question 4

Use the following information for items 
The Colin Division of Mochrie Company sells its product for $30 per unit.Variable costs per unit are: manufacturing, $12; and selling and administrative, $2.Fixed costs are: $200,000 manufacturing overhead, and $50,000 selling and administrative.There was no beginning inventory.Expected sales for next year are 40,000 units.Ryan Stiles, the manager of the Colin Division, is under pressure to improve the performance of the Division.As he plans for next year, he has to decide whether to produce 40,000 units or 50,000 units.
-What would the anufacturing cost per unit be under variable costing for each alternative?

Accepted Answer

The answer of Use the following information for items 
The...

Question 5

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

Accepted Answer

A) True 
 B)False

Question 6

GAAP requires that absorption costing be used for the costing of inventory for external reporting purposes.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) Cost-volume-profit 
B) Either variable or absorption costing 
C) Absorption costing 
D) Variable costing 
A) Cost-volume-profit 
B) Either variable or absorption costing 
C) Absorption costing 
D) Variable costing

Question 8

Under variable costing:

Accepted Answer

A) Only direct variable manufacturing costs are inventoriable. 
B) Only direct fixed manufacturing costs are inventoriable. 
C) All manufacturing costs are inventoriable. 
D) No manufacturing costs are inventoriable. 
A) Only direct variable manufacturing costs are inventoriable. 
B) Only direct fixed manufacturing costs are inventoriable. 
C) All manufacturing costs are inventoriable. 
D) No manufacturing costs are inventoriable.

Question 9

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.

Question 10

Use the following information for items 
Obama Company sells its product for $25 per unit.During 2012, 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.
-The per unit manufacturing cost under variable costing is

Accepted Answer

A) $12. 
B) $27. 
C) $29.50. 
D) $32. 
A) $12. 
B) $27. 
C) $29.50. 
D) $32.

Question 11

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

Question 12

In income statements prepared under absorption costing and variable costing, where would you find the terms contribution margin and gross profit?

Accepted Answer

A) The difference is expensed as a period cost the way variable costing immediately expenses fixed overhead as a period cost. 
B) The difference is over or under-applied overhead that if immaterial, will be closed out to cost of goods sold at year end. 
C) The difference will be held in inventory and taken to cost of goods sold when the units are sold next year. 
D) There is no difference. 
A) The difference is expensed as a period cost the way variable costing immediately expenses fixed overhead as a period cost. 
B) The difference is over or under-applied overhead that if immaterial, will be closed out to cost of goods sold at year end. 
C) The difference will be held in inventory and taken to cost of goods sold when the units are sold next year. 
D) There is no difference.

Question 13

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.

Question 14

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 15

Net income under GAAP highlights differences between variable and fixed costs.

Accepted Answer

A) True 
 B)False

Question 16

Fixed manufacturing overhead is a period cost under absorption costing.

Accepted Answer

A) True 
 B)False

Question 17

When units produced exceeds units sold

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 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

Use the following information for items 
The Colin Division of Mochrie Company sells its product for $30 per unit.Variable costs per unit are: manufacturing, $12; and selling and administrative, $2.Fixed costs are: $200,000 manufacturing overhead, and $50,000 selling and administrative.There was no beginning inventory.Expected sales for next year are 40,000 units.Ryan Stiles, the manager of the Colin Division, is under pressure to improve the performance of the Division.As he plans for next year, he has to decide whether to produce 40,000 units or 50,000 units.
-What would the manufacturing cost per unit be under absorption costing for each alternative?

Accepted Answer

The answer of Use the following information for items 
The...

Question 20

Under normal costing:

Accepted Answer

A) Only direct variable manufacturing costs are inventoriable. 
B) Only direct fixed manufacturing costs are inventoriable. 
C) A predetermined overhead rate is used to allocate overheads. 
D) Overhead costs are charged directly as incurred. 
A) Only direct variable manufacturing costs are inventoriable. 
B) Only direct fixed manufacturing costs are inventoriable. 
C) A predetermined overhead rate is used to allocate overheads. 
D) Overhead costs are charged directly as incurred.

Under absorption costing:

The computation of absorption costing gross profit always involves subtracting

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

GAAP requires that absorption costing be used for the costing of inventory for external reporting purposes.

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

Under variable costing:

When production exceeds sales

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?

In income statements prepared under absorption costing and variable costing, where would you find the terms contribution margin and gross profit?

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?

Management may be tempted to overproduce

Net income under GAAP highlights differences between variable and fixed costs.

Fixed manufacturing overhead is a period cost under absorption costing.

When units produced exceeds units sold

When units sold exceeds units produced

Under normal costing:

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: Variable Costing: a Decision-Making Perspective

Under absorption costing:

The computation of absorption costing gross profit always involves subtracting

When absorption costing is used, management may be tempted to overproduce in a given period in order to increase net income.

GAAP requires that absorption costing be used for the costing of inventory for external reporting purposes.

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

Under variable costing:

When production exceeds sales

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?

In income statements prepared under absorption costing and variable costing, where would you find the terms contribution margin and gross profit?

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?

Management may be tempted to overproduce

Net income under GAAP highlights differences between variable and fixed costs.

Fixed manufacturing overhead is a period cost under absorption costing.

When units produced exceeds units sold

When units sold exceeds units produced

Under normal costing:

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