Exam 5: Variable Costing

Which is most consistent with cost-volume-profit analysis?

Waterloo Skyline experienced the following costs in 2017: Direct materials \ 3.15 per unit Direct labor \ 2.80 per unit Variable manufacturing overhead \ 1.45 per unit Fixed manufacturing overhead \ 12.60 per unit There was no beginning inventory.During the year, the company sold 190,000 units.If net income using full and variable costing was $939,020 and $905,000, respectively, how many units did the company produce in 2017?

Radial Fuel Cells experienced the following costs in 2017 (Assume the same unit costs in all years): Direct materials \ 4 per unit Direct labor \ 8 per unit Manufacturing Overhead Costs Variable \ 2 per unit Fixed \ 150,000 Selling \& Administrative Costs Fixed selling \ 30,000 Variable selling \ 1 per unit Fixed administrative \ 20,000 During the year, the company manufactured 50,000 units and sold 45,000 units.Beginning inventory is zero.If net income for the year was $265,000 using full costing, what would net income be if the company used variable costing?

In full costing, when does fixed manufacturing overhead become an expense?

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 net income under full costing?

Brislin Gifts makes ceramic mugs and has the following amounts during 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 \ $\text { Production and sales in units for the first three months of } 2017 \text { are as follows: }$ 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.Which two months would have the same net income under full costing?

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.What is Brand Products' net income using full costing?

In variable costing, which of the following will be included as part of inventory on a company's balance sheet?

Affinity makes a single product, pool pumps.Information for 2017 appears below (Assume the same unit costs in all years): Sales in units 5,800 Production in units 6,200 Beginning inventory 1,500 Variable production cost per unit \ 46.00 Variable selling cost per unit \ 6.00 Fixed production cost per year \ 31,000 Fixed selling and administrative cost per year \ 24,000 Selling price per unit \ 75.00 How much is the full cost per unit of inventory?

In variable costing, fixed manufacturing overhead is considered a period cost.

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.Each bag of food is sold for $17.Assume the same unit costs in all years.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 variable costing, at what amount is the ending inventory for the year valued?

The cost of ending inventory using variable costing is always greater than or equal to full costing ending inventory.

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.What is the value of ending inventory using variable costing?

In full costing, which of the following will be included as part of inventory on a company's balance sheet?

During periods in which inventory levels increase, sales revenue will be larger when using full costing than if variable costing is used.

If a company increases production levels without increasing its units sold, both its full costing income and cash flows will be larger than if production were at a lower level.

If a company's income is positive and fixed costs exist, which of the following items will increase or decrease at a greater rate than the change in the amount of sales on a variable costing income statement?

Ranger Roadsters experienced the following costs in 2017 (Assume the same unit costs in all years): Direct materials \ 4.85 per unit Direct labor \ 2.10 per unit Manufacturing overhead costs Variable \ 2.25 per unit Fixed \ 75,075 Selling \& administrative costs Variable selling \ 0.95 per unit Fixed selling \ 8,000 Fixed administrative \ 2,000 There were 6,000 units in beginning inventory.During the year, the company manufactured 45,500 units and sold 48,000 units.If net income using variable costing was $82,500, how much is net income using full costing?

Affinity makes a single product, pool pumps.Information for 2017 appears below: Sales in units 5,800 Production in units 6,200 Beginning inventory 1,500 Variable production cost per unit \ 46.00 Variable selling cost per unit \ 6.00 Fixed production cost per year \ 31,000 Fixed selling and administrative cost per year \ 24,000 Selling price per unit \ 75.00 How much is the contribution margin per unit of inventory?

If the number of units sold is equal to the number of units produced, then contribution margin will equal gross margin.