Question 1

Which of the following statements is correct using the direct costing concept?

Accepted Answer

A) All manufacturing costs are included in the calculation of cost of goods manufactured. 
B) Only fixed costs are included in the calculation of cost of goods manufactured, while variable costs are considered period costs. 
C) Only variable manufacturing costs are included in the calculation of cost of goods manufactured, while fixed costs are considered period costs. 
D) All manufacturing costs are considered period costs. 
A) All manufacturing costs are included in the calculation of cost of goods manufactured. 
B) Only fixed costs are included in the calculation of cost of goods manufactured, while variable costs are considered period costs. 
C) Only variable manufacturing costs are included in the calculation of cost of goods manufactured, while fixed costs are considered period costs. 
D) All manufacturing costs are considered period costs. C

Question 2

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Accepted Answer

A) True 
 B)False  True

Question 3

Under absorption costing, increases or decreases in operating income due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

Accepted Answer

A) True 
 B)False  True

Question 4

The contribution margin ratio is computed as

Accepted Answer

A) sales divided by contribution margin 
B) contribution margin divided by sales 
C) contribution margin divided by cost of sales 
D) contribution margin divided by variable cost of sales 
A) sales divided by contribution margin 
B) contribution margin divided by sales 
C) contribution margin divided by cost of sales 
D) contribution margin divided by variable cost of sales

Question 5

Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable factory overhead.

Accepted Answer

A) True 
 B)False

Question 6

In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.

Accepted Answer

A) True 
 B)False

Question 7

Under variable costing, which of the following costs would be included in finished goods inventory?

Accepted Answer

A) neither variable nor fixed factory overhead cost 
B) both variable and fixed factory overhead cost 
C) only variable factory overhead cost 
D) only fixed factory overhead cost 
A) neither variable nor fixed factory overhead cost 
B) both variable and fixed factory overhead cost 
C) only variable factory overhead cost 
D) only fixed factory overhead cost

Question 8

For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

Accepted Answer

A) True 
 B)False

Question 9

If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is the manufacturing cost per unit if:
a. 20,000 units are manufactured and the company uses the variable costing concept?
b. 25,000 units are manufactured and the company uses the variable costing concept?
c. 20,000 units are manufactured and the company uses the absorption costing concept?
d. 25,000 units are manufactured and the company uses the absorption costing concept?

Accepted Answer

a. $15 (variable cost only)b.

Question 10

On the absorption costing income statement, deduction of the cost of goods sold from sales yields contribution margin.

Accepted Answer

A) True 
 B)False

Question 11

Match each of the following descriptions with the appropriate costing concept (a-c).
-Required by generally accepted accounting principles
A)Absorption costing only
B)Variable costing only
C)Both absorption and variable costing

Accepted Answer

The answer of Match each of the following descriptions with...

Question 12

The absorption costing income statement does not distinguish between variable and fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

Under which inventory costing method could increases or decreases in operating income be misinterpreted to be the result of operating efficiencies or inefficiencies?

Accepted Answer

A) only variable costing 
B) only absorption costing 
C) both variable and absorption costing 
D) neither variable nor absorption costing 
A) only variable costing 
B) only absorption costing 
C) both variable and absorption costing 
D) neither variable nor absorption costing

Question 14

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available:   The effect on operating income if absorption costing is used rather than variable costing would be a(n)

Accepted Answer

A) $80,000 decrease 
B) $80,000 increase 
C) $104,000 increase 
D) $104,000 decrease 
A) $80,000 decrease 
B) $80,000 increase 
C) $104,000 increase 
D) $104,000 decrease

Question 15

S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the manufactured product remained unchanged. The manufacturing costs were as follows:   Which of the following statements is true?

Accepted Answer

A) Net income will be the same under both variable and absorption costing. 
B) Net income under variable costing will be $45,000 less than net income under absorption costing. 
C) Net income under absorption costing will be $40,000 more than under variable costing. 
D) The difference in net income cannot be determined. 
A) Net income will be the same under both variable and absorption costing. 
B) Net income under variable costing will be $45,000 less than net income under absorption costing. 
C) Net income under absorption costing will be $40,000 more than under variable costing. 
D) The difference in net income cannot be determined.

Question 16

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured

Accepted Answer

A) exceed units sold 
B) equal units sold 
C) are less than units sold 
D) are equal to or greater than units sold 
A) exceed units sold 
B) equal units sold 
C) are less than units sold 
D) are equal to or greater than units sold

Question 17

The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available:   The effect on operating income if absorption costing is used rather than variable costing would be a

Accepted Answer

A) $44,000 decrease 
B) $44,000 increase 
C) $64,000 increase 
D) $64,000 decrease 
A) $44,000 decrease 
B) $44,000 increase 
C) $64,000 increase 
D) $64,000 decrease

Question 18

Which of the following terms is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

Accepted Answer

A) absorption costing 
B) differential costing 
C) standard costing 
D) variable costing 
A) absorption costing 
B) differential costing 
C) standard costing 
D) variable costing

Question 19

A business operated at 100% of capacity during its first month and incurred the following costs:   If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of contribution margin that would be reported on the variable costing income statement is

Accepted Answer

A) $51,400 
B) $52,000 
C) $54,000 
D) $53,000 
A) $51,400 
B) $52,000 
C) $54,000 
D) $53,000

Question 20

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured

Accepted Answer

A) exceed units sold 
B) equal units sold 
C) are less than units sold 
D) are equal to or greater than units sold 
A) exceed units sold 
B) equal units sold 
C) are less than units sold 
D) are equal to or greater than units sold

Exam 21: Variable Costing for Management Analysis

Which of the following statements is correct using the direct costing concept?

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Under absorption costing, increases or decreases in operating income due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

The contribution margin ratio is computed as

Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable factory overhead.

In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.

Under variable costing, which of the following costs would be included in finished goods inventory?

For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

On the absorption costing income statement, deduction of the cost of goods sold from sales yields contribution margin.

Match each of the following descriptions with the appropriate costing concept (a-c). -Required by generally accepted accounting principles A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

The absorption costing income statement does not distinguish between variable and fixed costs.

Under which inventory costing method could increases or decreases in operating income be misinterpreted to be the result of operating efficiencies or inefficiencies?

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: The effect on operating income if absorption costing is used rather than variable costing would be a(n)

S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the manufactured product remained unchanged. The manufacturing costs were as follows: Which of the following statements is true?

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured

The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: The effect on operating income if absorption costing is used rather than variable costing would be a

Which of the following terms is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of contribution margin that would be reported on the variable costing income statement is

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

The Accounting Cycle

Accounting for Retail Businesses

Inventories

Internal Control and Cash

Receivables

Long-Term Assets: Fixed and Intangible

Liabilities: Current, Installment Notes, and Contingencies

Liabilities: Bonds Payable

Corporations: Organization, Stock Transactions, and Dividends

Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity-Based Costing

Support Department and Joint Cost Allocation

Cost-Volume-Profit Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

The Balanced Scorecard and Corporate Social Responsibility

Investments

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