Question 1

Under absorption 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 2

Throughput costing is also called super absorption costing.

Accepted Answer

A) True 
 B)False

Question 3

The use of normal costing with absorption costing

Accepted Answer

A) is used because it is easier than actual costing with absorption costing. 
B) is used because it is more practical than actual costing. 
C) is essentially the same as using actual costing; accountants have created the term for the sake of semantics. 
D) means that only normal costs are used in assigning costs to production; any unexpected costs that occur are immediately expenses as period costs. 
A) is used because it is easier than actual costing with absorption costing. 
B) is used because it is more practical than actual costing. 
C) is essentially the same as using actual costing; accountants have created the term for the sake of semantics. 
D) means that only normal costs are used in assigning costs to production; any unexpected costs that occur are immediately expenses as period costs.

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 manufacturing cost per unit be under variable costing for each alternative? $\quad $$\quad $$\quad $$\underline{40,000 \text { units }} \quad \underline{50,000 \text { units }}$ 
a) $\quad $$\quad $$\quad $$\quad $$12.00$\quad $$\quad $$\quad $$12.00
b)$\quad $$\quad $$\quad $$\quad $$14.00$\quad $$\quad $$\quad $$14.00
c)$\quad $$\quad $$\quad $$\quad $$16.00$\quad $$\quad $$\quad $$17.00
d)$\quad $$\quad $$\quad $$\quad $$17.00$\quad $$\quad $$\quad $$16.00

Accepted Answer

The answer of Use the following information for items 
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Question 5

If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production

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 6

Normal costing uses

Accepted Answer

A) actual costs for direct materials, direct labour and variable and fixed overhead. 
B) actual costs for direct materials, and direct labour, and a predetermined overhead rate for allocating variable and fixed overhead costs to production units. 
C) actual costs for direct materials, direct labour and variable overhead, and a predetermined overhead rate for fixed overhead. 
D) variable costing for direct materials, direct labour and variable overhead and a predetermined overhead rate for fixed overhead. 
A) actual costs for direct materials, direct labour and variable and fixed overhead. 
B) actual costs for direct materials, and direct labour, and a predetermined overhead rate for allocating variable and fixed overhead costs to production units. 
C) actual costs for direct materials, direct labour and variable overhead, and a predetermined overhead rate for fixed overhead. 
D) variable costing for direct materials, direct labour and variable overhead and a predetermined overhead rate for fixed overhead.

Question 7

If normal costing is used when preparing an absorption costing income statement, the fixed manufacturing overhead assigned to inventory is based on a predetermined fixed manufacturing overhead rate.

Accepted Answer

A) True 
 B)False

Question 8

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 1/1/14.Production was 20 units per year in 2014-2016.Sales were 20 units in 2014, 16 units in 2015, and 24 units in 2016.
-Income under variable costing for 2015 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.

Question 9

Under absorption costing when production equals sales in a year,

Accepted Answer

A) inventory values and cost of goods sold are higher than under variable costing. 
B) inventory values and cost of goods sold are lower than under variable costing. 
C) inventory values and cost of goods sold are the same as under variable costing. 
D) inventory values are higher and cost of goods sold is lower than under variable costing. 
A) inventory values and cost of goods sold are higher than under variable costing. 
B) inventory values and cost of goods sold are lower than under variable costing. 
C) inventory values and cost of goods sold are the same as under variable costing. 
D) inventory values are higher and cost of goods sold is lower than under variable costing.

Question 10

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 11

Selling and administrative costs are period costs under both absorption and variable costing.

Accepted Answer

A) True 
 B)False

Question 12

When absorption costing is used for external reporting, variable costing can still be used for internal reporting purposes.

Accepted Answer

A) True 
 B)False

Question 13

Use the following information for items 
Obama Company sells its product for $25 per unit.During 2016, 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 absorption costing is

Accepted Answer

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

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Absorption costing

Accepted Answer

A) is preferred to variable costing for external reporting purposes, but either method is acceptable. 
B) normally results in higher net income than variable costing, and is therefore required for income tax purposes. 
C) is not allowed for external reporting purposes. 
D) is required under GAAP. 
A) is preferred to variable costing for external reporting purposes, but either method is acceptable. 
B) normally results in higher net income than variable costing, and is therefore required for income tax purposes. 
C) is not allowed for external reporting purposes. 
D) is required under GAAP.

Question 16

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.

Question 17

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 1/1/14.Production was 20 units per year in 2014-2016.Sales were 20 units in 2014, 16 units in 2015, and 24 units in 2016.
-Income under absorption costing for 2015 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.

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

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 20

Use the following information for items 
Obama Company sells its product for $25 per unit.During 2016, 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.

Under absorption costing

Throughput costing is also called super absorption costing.

The use of normal costing with absorption costing

If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production

Normal costing uses

If normal costing is used when preparing an absorption costing income statement, the fixed manufacturing overhead assigned to inventory is based on a predetermined fixed manufacturing overhead rate.

Under absorption costing when production equals sales in a year,

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?

Selling and administrative costs are period costs under both absorption and variable costing.

When absorption costing is used for external reporting, variable costing can still be used for internal reporting purposes.

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

Absorption costing

Under normal costing

When units sold exceeds units produced

Which of the following statements about variable costing is true?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

Activity-Based Costing

Decision-Making: Costvolumeprofit

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

Under absorption costing

Throughput costing is also called super absorption costing.

The use of normal costing with absorption costing

If a division manager's compensation is based upon the division's net income, the manager may decide to meet the net income targets by increasing production

Normal costing uses

If normal costing is used when preparing an absorption costing income statement, the fixed manufacturing overhead assigned to inventory is based on a predetermined fixed manufacturing overhead rate.

Under absorption costing when production equals sales in a year,

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?

Selling and administrative costs are period costs under both absorption and variable costing.

When absorption costing is used for external reporting, variable costing can still be used for internal reporting purposes.

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

Absorption costing

Under normal costing

When units sold exceeds units produced

Which of the following statements about variable costing is true?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

Activity-Based Costing

Decision-Making: Costvolumeprofit

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters