Data from Rannier Metals for 2017 is as follows: $\begin{array}{lr} \text { Sales } & \$ 20 \text { per unit } \\ \text { Variable cost of goods sold } & ? ? \\ \text { Fixed manufacturing overhead } & \$ 85,000 \\ \text { Variable selling \& administrative costs } & ? ? \\ \text { Fixed selling \& administrative costs } & \$ 150,000 \end{array}$ The company produced 145,000 units during the year and sold 130,000 units.Variable production costs per unit and fixed costs have remained constant all year.Net income for the year was $1,000,000.How much was the company's contribution margin?

A) $765,000 B) $1,235,000 C) $1,365,000 D) Not enough information is provided to determine the answer A) $765,000 B) $1,235,000 C) $1,365,000 D) Not enough information is provided to determine the answer

Boulder Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: $\begin{array}{lr} \text { Direct material per unit } & 20 \\ \text { Direct labor per unit } & 12 \\ \text { Variable manufacturing overhead per unit } & 10 \\ \text { Fixed manufacturing overhead per year } & 148,500 \end{array}$ In addition, the company has fixed selling and administrative costs of $150,000 per year.During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.There was no beginning inventory.How much is net income using full costing?

A) $1,641,000 B) $1,590,000 C) $1,441,500 D) $1,491,000 A) $1,641,000 B) $1,590,000 C) $1,441,500 D) $1,491,000

Ranger Productions experienced the following costs in 2017: $\begin{array}{lr} \text { Direct materials } & \$ 1.50 \text { per unit } \\ \text { Direct labor } & \$ 2.60 \text { per unit } \\ \text { Variable manufacturing overhead } & \$ 1.20 \text { per unit } \\ \text { Variable selling costs } & \$ 4.40 \text { per unit } \\ \text { Fixed manufacturing overhead } & \$ 84,000 \\ \text { Fixed selling costs } & \$ 32,000 \\ \text { Fixed administrative costs } & \$ 15,000 \end{array}$ During 2017, the company manufactured 65,000 units and sold 62,000 units.The unit cost is the same throughout the year.Beginning inventory is zero.How much will the company report as total variable product costs on its 2017 contribution income statement?

A) $328,600 B) $601,400 C) $344,500 D) $630,500 A) $328,600 B) $601,400 C) $344,500 D) $630,500

Meow Foods had 2,000 25-pound bags of cat food in beginning inventory.During 2017, the company manufactured 16,000 bags and sold 15,000 units.Assume the same unit costs in all years.Each bag of food is sold for $17.The company experienced the following costs: $\begin{array}{lr} \text { Direct materials } & \$ 4.50 \text { per unit } \\ \text { Direct labor } & \$ 2.10 \text { per unit } \\ \text { Variable manufacturing overhead } & \$ 1.90 \text { per unit } \\ \text { Variable selling } & \$ 1.00 \text { per unit } \\ \text { Fixed manufacturing overhead } & \$ 48,000 \\ \text { Fixed selling } & \$ 24,000 \\ \text { Fixed administrative } & \$ 30,000 \end{array}$ If the company uses full costing, how much will be reported as inventory on the December 31, 2017 balance sheet?

A) $9,000 B) $25,500 C) $28,500 D) $34,500 A) $9,000 B) $25,500 C) $28,500 D) $34,500

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 higher or lower will variable costing be than full costing income?

A) $180,000 higher B) $320,000 higher C) $320,000 lower D) $180,000 lower A) $180,000 higher B) $320,000 higher C) $320,000 lower D) $180,000 lower

Cold City Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: $\begin{array}{lr} \text { Direct material per unit } & \$ 22 \\ \text { Direct labor per unit } & 15 \\ \text { Variable manufacturing overhead per unit } & 6 \\ \text { Fixed manufacturing overhead per year } & 23,400 \end{array}$ In addition, the company has fixed selling and administrative costs of $9,360 per year.During the year, Cold City Blowers produced 780 snow blowers and sold 800 snow blowers.Beginning inventory consisted of 50 snow blowers.How much is considered to be product cost under variable costing?

A) $34,400 B) $33,540 C) $29,600 D) None of these answer choices are correct. A) $34,400 B) $33,540 C) $29,600 D) None of these answer choices are correct.

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 full costing?

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

Brislin Gifts makes ceramic mugs and has the following amounts for 2017 (Assume the same unit costs in all years): $\begin{array}{lr} \text { Selling price } & \$ 9.00 \text { per mug } \\ \text { Variable production cost } & \$ 2.50 \text { per mug } \\ \text { Variable selling cost } & \$ 1.10 \text { per mug } \\ \text { Fixed production cost } & \$ 100,000 \text { per month }\\ \text { Fixed selling and administrative cost }& \$ 60,000 \text { per month }\ \end{array}$ Production and sales in units for the first three months of 2017 are as follows: $\begin{array}{lll}\text { Year}&\text { Production}&\text { Sales }\\ \text { January } & 50,000 & 44,000 \\ \text { February } & 40,000 & 45,000 \\ \text { March } & 44,000 & 46,000 \end{array}$ Inventory at January 1, 2017 consisted of 1,000 mugs.How much is net income for January using variable costing?

A) $89,600 B) $77,600 C) $67,480 D) None of these answer choices are correct. A) $89,600 B) $77,600 C) $67,480 D) None of these answer choices are correct.

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 full costing?

A) $560,000 B) $380,000 C) $340,000 D) $740,000 A) $560,000 B) $380,000 C) $340,000 D) $740,000

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 full costing at December 31, 2017?

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

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 inventory at the end of the month under variable costing?

A) $72,000 B) $148,500 C) $174,900 D) $84,800 A) $72,000 B) $148,500 C) $174,900 D) $84,800

Boulder Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: $\begin{array}{lr} \text { Direct material per unit } & 20 \\ \text { Direct labor per unit } & 12 \\ \text { Variable manufacturing overhead per unit } & 10 \\ \text { Fixed manufacturing overhead per year } & 148,500 \end{array}$ In addition, the company has fixed selling and administrative costs of $150,000 per year.During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.Beginning inventory consists of no units.How much fixed manufacturing overhead is in ending inventory under full costing?

A) $0 B) $49,500 C) $148,500 D) $99,000 A) $0 B) $49,500 C) $148,500 D) $99,000

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 inventory at the end of the month under full costing?

A) $72,000 B) $148,500 C) $174,900 D) $84,800 A) $72,000 B) $148,500 C) $174,900 D) $84,800

Exam 5: Variable Costing

Data from Rannier Metals for 2017 is as follows: Sales \ 20 per unit Variable cost of goods sold ?? Fixed manufacturing overhead \ 85,000 Variable selling \& administrative costs ?? Fixed selling \& administrative costs \ 150,000 The company produced 145,000 units during the year and sold 130,000 units.Variable production costs per unit and fixed costs have remained constant all year.Net income for the year was $1,000,000.How much was the company's contribution margin?

(Multiple Choice)

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Question 41

Boulder Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: Direct material per unit 20 Direct labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year 148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year.During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.There was no beginning inventory.How much is net income using full costing?

(Multiple Choice)

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Question 42

Ranger Productions experienced the following costs in 2017: Direct materials \ 1.50 per unit Direct labor \ 2.60 per unit Variable manufacturing overhead \ 1.20 per unit Variable selling costs \ 4.40 per unit Fixed manufacturing overhead \ 84,000 Fixed selling costs \ 32,000 Fixed administrative costs \ 15,000 During 2017, the company manufactured 65,000 units and sold 62,000 units.The unit cost is the same throughout the year.Beginning inventory is zero.How much will the company report as total variable product costs on its 2017 contribution income statement?

(Multiple Choice)

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Question 43

Under variable costing, net income can be increased by increasing production without increasing sales.

(True/False)

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Question 44

Meow Foods had 2,000 25-pound bags of cat food in beginning inventory.During 2017, the company manufactured 16,000 bags and sold 15,000 units.Assume the same unit costs in all years.Each bag of food is sold for $17.The company experienced the following costs: Direct materials \ 4.50 per unit Direct labor \ 2.10 per unit Variable manufacturing overhead \ 1.90 per unit Variable selling \ 1.00 per unit Fixed manufacturing overhead \ 48,000 Fixed selling \ 24,000 Fixed administrative \ 30,000 If the company uses full costing, how much will be reported as inventory on the December 31, 2017 balance sheet?

(Multiple Choice)

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Question 45

Leesburg Bags produces backpacks.The costs and prices for the backpacks follow (Assume the same unit costs in all years): Selling price \ 23.00 per backpack Variable costs: Production \ 11.00 per backpack Selling \ 2.00 per backpack Fixed Costs: Production \ 900,000 per year Selling and administrative \ 540,000 per year 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 higher or lower will variable costing be than full costing income?

(Multiple Choice)

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Question 46

The use of variable costing encourages management of earnings by adjusting production volume.

(True/False)

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Question 47

Cold City Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: Direct material per unit \ 22 Direct labor per unit 15 Variable manufacturing overhead per unit 6 Fixed manufacturing overhead per year 23,400 In addition, the company has fixed selling and administrative costs of $9,360 per year.During the year, Cold City Blowers produced 780 snow blowers and sold 800 snow blowers.Beginning inventory consisted of 50 snow blowers.How much is considered to be product cost under variable costing?

(Multiple Choice)

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Question 48

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): Variable costs: Product royalty fees \ 3.30 per DVD DVD production \ 1.20 per DVD Selling and admin costs \ 0.80 per DVD Fixed costs: Production \ 128,000 per month Selling and administration \ 130,000 per month 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 full costing?

(Multiple Choice)

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Question 49

If the number of units sold is greater than the number of units produced,

(Multiple Choice)

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Question 50

Brislin Gifts makes ceramic mugs and has the following amounts for 2017 (Assume the same unit costs in all years): Selling price \ 9.00 per mug Variable production cost \ 2.50 per mug Variable selling cost \ 1.10 per mug Fixed production cost \ 100,000 per month Fixed selling and administrative cost \ 60,000 per month \ Production and sales in units for the first three months of 2017 are as follows: Year Production Sales January 50,000 44,000 February 40,000 45,000 March 44,000 46,000 Inventory at January 1, 2017 consisted of 1,000 mugs.How much is net income for January using variable costing?

(Multiple Choice)

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Question 51

Leesburg Bags produces backpacks.The costs and prices for the backpacks follow (Assume the same unit costs in all years): Selling price \ 23.00 per backpack Variable costs: Production \ 11.00 per backpack Selling \ 2.00 per backpack Fixed Costs: Production \ 900,000 per year Selling and administrative \ 540,000 per year 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 full costing?

(Multiple Choice)

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Question 52

Aerotrino produces and sells popular t-shirts.Following is information about its t-shirts for 2017: Selling price \ 15.00 per t-shirt Variable costs: Production (manufacturing costs) \ 3.00 per t-shirt Selling \& administration \ 1.00 per t-shirt Fixed costs: Production (manufacturing costs) \ 1,000,000 per year Selling \& administration \ 2,000,000 per vear 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 full costing at December 31, 2017?

(Multiple Choice)

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Question 53

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): Variable costs: Product royalty fees \ 3.30 per DVD DVD production \ 1.20 per DVD Selling and admin costs \ 0.80 per DVD Fixed costs: Production \ 128,000 per month Selling and administration \ 130,000 per month During June, 160,000 DVDs were produced and 144,000 were sold.There were 17,000 DVDs in beginning inventory.How much is inventory at the end of the month under variable costing?

(Multiple Choice)

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Question 54

Zintec has fixed manufacturing costs of $400,000 and produces 10,000 and sells 8,000 wagons during the year.There is no beginning inventory.Which of the following conclusions can be drawn?

(Multiple Choice)

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Question 55

Under variable costing, ending inventory reported on a company's balance sheet includes variable production costs and variable selling and administrative costs.

(True/False)

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Question 56

Boulder Blowers produces snow blowers.The selling price per snow blower is $100.Costs involved in production are: Direct material per unit 20 Direct labor per unit 12 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per year 148,500 In addition, the company has fixed selling and administrative costs of $150,000 per year.During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.Beginning inventory consists of no units.How much fixed manufacturing overhead is in ending inventory under full costing?

(Multiple Choice)

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Question 57

Under full costing, all fixed costs of production are included in Finished Goods Inventory and remain there until all inventory units are sold.

(True/False)

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Question 58

A full costing income statement will display a higher net income than variable costing as long as inventory levels continue to increase.

(True/False)

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Question 59

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): Variable costs: Product royalty fees \ 3.30 per DVD DVD production \ 1.20 per DVD Selling and admin costs \ 0.80 per DVD Fixed costs: Production \ 128,000 per month Selling and administration \ 130,000 per month During June, 160,000 DVDs were produced and 144,000 were sold.There were 17,000 DVDs in beginning inventory.How much is inventory at the end of the month under full costing?

(Multiple Choice)

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Question 60

Under variable costing, net income can be increased by increasing production without increasing sales.

The use of variable costing encourages management of earnings by adjusting production volume.

If the number of units sold is greater than the number of units produced,

Zintec has fixed manufacturing costs of $400,000 and produces 10,000 and sells 8,000 wagons during the year.There is no beginning inventory.Which of the following conclusions can be drawn?

Under variable costing, ending inventory reported on a company's balance sheet includes variable production costs and variable selling and administrative costs.

Under full costing, all fixed costs of production are included in Finished Goods Inventory and remain there until all inventory units are sold.

A full costing income statement will display a higher net income than variable costing as long as inventory levels continue to increase.

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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