Question 1

Contribution margin is reported on an absorption costing income statement.

Accepted Answer

A) True 
 B)False  False

Question 2

Which method provides an incentive for managers to produce more units in order to increase income for performance evaluations?

Accepted Answer

A) Full costing 
B) Variable costing 
C) Both full costing and variable costing 
D) Neither full costing nor variable costing 
A) Full costing 
B) Variable costing 
C) Both full costing and variable costing 
D) Neither full costing nor variable costing A

Question 3

WebFlicks is an online DVD company that produces its own DVD copies of first-run movies that it sells for $8.00 each.The following information is available (Assume the same unit costs in all years): $\begin{array}{ll}\text { Variable costs: }\
\text { Product royalty fees } & \$ 3.30 \text { per DVD } \
\text { DVD production } & \$ 1.20 \text { per DVD } \
\text { Selling and admin costs } & \$ 0.80 \text { per DVD }\\text { Fixed costs: }\\text { Production }&\$ 128,000 \text { per month }\
\text { Selling and administration }&\$ 130,000 \text { per month }\
\end{array}$ During June, 160,000 DVDs were produced and 144,000 were sold.There were 17,000 DVDs in beginning inventory.How much is net income per month under variable costing?

Accepted Answer

A) $143,600 
B) $130,800 
C) $130,640 
D) None of these answer choices are correct. 
A) $143,600 
B) $130,800 
C) $130,640 
D) None of these answer choices are correct. B

Question 4

Variable costing income is more useful for decision making because costs are separated by function.

Accepted Answer

A) True 
 B)False

Question 5

Leesburg Bags produces backpacks.The costs and prices for the backpacks follow (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Selling price } & \$ 23.00 \text { per backpack } \
\text { Variable costs: } & \
\text { Production } & \$ 11.00 \text { per backpack } \
\text { Selling } & \$ 2.00 \text { per backpack } \
\text { Fixed Costs: } & \
\text { Production } & \$ 900,000 \text { per year } \
\text { Selling and administrative } & \$ 540,000 \text { per year }
\end{array}$$ Leesburg Bags produced 250,000 backpacks for the year and sold 200,000.There was no beginning inventory, and costs throughout the year were stable.How much is the cost of ending inventory under full costing?

Accepted Answer

A) $730,000 
B) $550,000 
C) $650,000 
D) $938,000 
A) $730,000 
B) $550,000 
C) $650,000 
D) $938,000

Question 6

Affinity makes a single product, pool pumps.Information for 2017 appears below (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Sales in units } & 5,800 \
\text { Production in units } & 6,200 \
\text { Beginning inventory } & 1,500 \
\text { Variable production cost per unit } & \$ 46.00 \
\text { Variable selling cost per unit } & \$ 6.00 \
\text { Fixed production cost per year } & \$ 31,000 \
\text { Fixed selling and administrative cost per year } & \$ 24,000 \
\text { Selling price per unit } & \$ 75.00
\end{array}$$ How much is net income for the year under full costing?

Accepted Answer

A) $78,400 
B) $80,400 
C) $87,600 
D) None of these answer choices are correct. 
A) $78,400 
B) $80,400 
C) $87,600 
D) None of these answer choices are correct.

Question 7

Robley Company's fixed manufacturing overhead costs totaled $235,000 and fixed corporate operating costs totaled $116,000.Under full costing, how should these costs be classified? $\begin{array}{lrr}& \text { Period Costs } & \text { Product Costs } \
\text { A. } & \$ 235,000 & \$ 116,000 \
\text { B. } & \$ 0 & \$ 351,000 \
\text { C. } & \$ 351,000 & \$ 0 \
\text { D. } & \$ 116,000 & \$ 235,000
\end{array}$

Accepted Answer

The answer of Robley Company's fixed manufacturing overhead costs totaled...

Question 8

If a company has no fixed costs, variable costing income will equal full costing income, regardless of any increase or decrease in inventory levels during the period.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true when units produced exceed units sold?

Accepted Answer

A) Full costing and variable costing will yield the same net income. 
B) Full costing assigns a portion of the fixed manufacturing costs to the units in ending inventory. 
C) Net income will be higher under variable costing than under full costing. 
D) Inventory levels will decrease. 
A) Full costing and variable costing will yield the same net income. 
B) Full costing assigns a portion of the fixed manufacturing costs to the units in ending inventory. 
C) Net income will be higher under variable costing than under full costing. 
D) Inventory levels will decrease.

Question 10

Full costing

Accepted Answer

A) is another name for variable costing. 
B) considers fixed manufacturing overhead as an inventory cost. 
C) often provides the information needed for CVP analysis. 
D) considers fixed production cost as period cost. 
A) is another name for variable costing. 
B) considers fixed manufacturing overhead as an inventory cost. 
C) often provides the information needed for CVP analysis. 
D) considers fixed production cost as period cost.

Question 11

Absorption costing is required for external reporting under generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 12

Aerotrino produces and sells popular t-shirts.Following is information about its t-shirts for 2017: $\begin{array}{lr}
\text { Selling price } & \$ 15.00 \text { per t-shirt } \
\text { Variable costs: } & \
 \text { Production (manufacturing costs) } & \$ 3.00 \text { per t-shirt }\\text { Selling } \& \text { administration } & \$ 1.00 \text { per t-shirt } \
\text { Fixed costs: } & \
\text { Production (manufacturing costs) } & \$ 1,000,000 \text { per year } \
\text { Selling \& administration } & \$ 2,000,000 \text { per vear }
\end{array}$ During 2017, the company produced 400,000 t-shirts and sold 350,000 of them.Assume that there was no beginning inventory.How much is the inventory under variable costing at December 31, 2017?

Accepted Answer

A) $150,000 
B) $275,000 
C) $200,000 
D) $325,000 
A) $150,000 
B) $275,000 
C) $200,000 
D) $325,000

Question 13

Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these calculators at a price of $10.00 each.Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed manufacturing overhead, $21,500.Selling and administrative costs are all fixed and totaled $24,000.Beginning inventory consists of no units.Brand Products uses variable costing.How much will the company's contribution margin increase if sales increase 10%?

Accepted Answer

A) $16,974 
B) $23,000 
C) $14,996 
D) $12,420 
A) $16,974 
B) $23,000 
C) $14,996 
D) $12,420

Question 14

Full costing income can be increased by decreasing production even though the additional inventory items will not be sold during the current period.

Accepted Answer

A) True 
 B)False

Question 15

Roger Excavating Company experienced the following costs in 2017: $\begin{array}{lr}
\text { Direct materials } & \$ 1.75 \text { per unit } \
\text { Direct labor } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 2.50 \text { per unit } \
\text { Variable selling } & \$ 0.75 \text { per unit } \
\text { Fixed manufacturing overhead } & \$ 50,000 \
\text { Fixed selling } & \$ 15,000 \
\text { Fixed administrative } & \$ 5,000
\end{array}$ During 2017, the company manufactured 100,000 units and sold 80,000 units.If the average selling price per unit was $22.65, what is the amount of the company's contribution margin per unit?

Accepted Answer

A) $16.40 
B) $15.65 
C) $18.90 
D) $13.65 
A) $16.40 
B) $15.65 
C) $18.90 
D) $13.65

Question 16

Macho Enterprises experienced the following costs in 2017: $\begin{array}{lr}
\text { Direct materials } & \$ 2.65 \text { per unit } \
\text { Direct labor } & \$ 1.80 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 3.25 \text { per unit } \
\text { Variable selling } & \$ 1.15 \text { per unit } \
\text { Fixed manufacturing overhead } & \$ 94,000 \
\text { Fixed selling } & \$ 35,000 \
\text { Fixed administrative } & \$ 10,000
\end{array}$ During the year, the company manufactured 47,000 units and sold 40,000 units.How much is the unit product cost using full costing?

Accepted Answer

A) $7.70 
B) $9.70 
C) $8.85 
D) $10.85 
A) $7.70 
B) $9.70 
C) $8.85 
D) $10.85

Question 17

Which of the following items appears on a variable costing income statement but not on a full costing income statement?

Accepted Answer

A) Sales 
B) Gross margin 
C) Net income 
D) Contribution margin 
A) Sales 
B) Gross margin 
C) Net income 
D) Contribution margin

Question 18

Affinity makes a single product, pool pumps.Information for 2017 appears below (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Sales in units } & 5,800 \
\text { Production in units } & 6,200 \
\text { Beginning inventory } & 1,500 \
\text { Variable production cost per unit } & \$ 46.00 \
\text { Variable selling cost per unit } & \$ 6.00 \
\text { Fixed production cost per year } & \$ 31,000 \
\text { Fixed selling and administrative cost per year } & \$ 24,000 \
\text { Selling price per unit } & \$ 75.00
\end{array}$$ How much will be reported for inventory on the balance sheet if variable costing is used?

Accepted Answer

A) $87,400 
B) $96,900 
C) $108,300 
D) $118,400 
A) $87,400 
B) $96,900 
C) $108,300 
D) $118,400

Question 19

Leesburg Bags produces backpacks.The costs and prices for the backpacks follow (Assume the same unit costs in all years): $$\begin{array} { l r } 
\text { Selling price } & \$ 23.00 \text { per backpack } \
\text { Variable costs: } & \
\text { Production } & \$ 11.00 \text { per backpack } \
\text { Selling } & \$ 2.00 \text { per backpack } \
\text { Fixed Costs: } & \
\text { Production } & \$ 900,000 \text { per year } \
\text { Selling and administrative } & \$ 540,000 \text { per year }
\end{array}$$ Leesburg Bags produced 250,000 backpacks for the year and sold 200,000.There was no beginning inventory, and costs throughout the year were stable.How much is net income under variable costing?

Accepted Answer

A) $740,000 
B) $848,000 
C) $560,000 
D) $2,000,000 
A) $740,000 
B) $848,000 
C) $560,000 
D) $2,000,000

Question 20

Just-in-time (JIT) inventory management systems cause the difference between variable costing income and full costing income to be much greater than if standard inventory levels had been maintained by the company.

Accepted Answer

A) True 
 B)False

Contribution margin is reported on an absorption costing income statement.

Which method provides an incentive for managers to produce more units in order to increase income for performance evaluations?

Variable costing income is more useful for decision making because costs are separated by function.

Robley Company's fixed manufacturing overhead costs totaled $235,000 and fixed corporate operating costs totaled $116,000.Under full costing, how should these costs be classified? Period Costs Product Costs A. \ 235,000 \ 116,000 B. \ 0 \ 351,000 C. \ 351,000 \ 0 D. \ 116,000 \ 235,000

If a company has no fixed costs, variable costing income will equal full costing income, regardless of any increase or decrease in inventory levels during the period.

Which of the following is true when units produced exceed units sold?

Full costing

Absorption costing is required for external reporting under generally accepted accounting principles.

Full costing income can be increased by decreasing production even though the additional inventory items will not be sold during the current period.

Which of the following items appears on a variable costing income statement but not on a full costing income statement?

Just-in-time (JIT) inventory management systems cause the difference between variable costing income and full costing income to be much greater than if standard inventory levels had been maintained by the company.

Managerial Accounting in the Information Age

Job-Order Costing for Manufacturing and Service Companies

Process Costing

Cost-Volume-Profit Analysis

Cost Allocation and Activity-Based Costing

The Use of Cost Information in Management Decision Making

Pricing Decisions

Capital Budgeting Decisions

Budgetary Planning and Control

Standard Costs and Variance Analysis

Decentralization and Performance Evaluation

Statement of Cash Flows

Analyzing Financial Statements: a Managerial Perspective

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Exam 5: Variable Costing

Contribution margin is reported on an absorption costing income statement.

Which method provides an incentive for managers to produce more units in order to increase income for performance evaluations?

Variable costing income is more useful for decision making because costs are separated by function.

Robley Company's fixed manufacturing overhead costs totaled $235,000 and fixed corporate operating costs totaled $116,000.Under full costing, how should these costs be classified? Period Costs Product Costs A. \ 235,000 \ 116,000 B. \ 0 \ 351,000 C. \ 351,000 \ 0 D. \ 116,000 \ 235,000

If a company has no fixed costs, variable costing income will equal full costing income, regardless of any increase or decrease in inventory levels during the period.

Which of the following is true when units produced exceed units sold?

Full costing

Absorption costing is required for external reporting under generally accepted accounting principles.

Full costing income can be increased by decreasing production even though the additional inventory items will not be sold during the current period.

Which of the following items appears on a variable costing income statement but not on a full costing income statement?

Just-in-time (JIT) inventory management systems cause the difference between variable costing income and full costing income to be much greater than if standard inventory levels had been maintained by the company.

Managerial Accounting in the Information Age

Job-Order Costing for Manufacturing and Service Companies

Process Costing

Cost-Volume-Profit Analysis

Cost Allocation and Activity-Based Costing

The Use of Cost Information in Management Decision Making

Pricing Decisions

Capital Budgeting Decisions

Budgetary Planning and Control

Standard Costs and Variance Analysis

Decentralization and Performance Evaluation

Statement of Cash Flows

Analyzing Financial Statements: a Managerial Perspective

Filters