Exam 8: Variable Costing and the Costs of Quality and Sustainability

On a global scale, there are four primary environmental agreements addressing the atmosphere, hazardous substances, the marine environment, nature conservation, and nuclear power issues.

Under variable costing, fixed manufacturing overhead is:

Use the following information to answer the following Questions Fort Smith Technologies incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: -If Fort Smith uses variable costing, the total inventoriable costs for the year would be:

What is a product's grade, as a characteristic of quality? Give a service industry example.

Income reported under absorption costing and variable costing is:

Consider the following statements about absorption costing and variable costing: I. Variable costing is consistent with contribution reporting and cost-volume-profit analysis. II. Absorption costing must be used for external financial reporting. III. A number of companies use both absorption costing and variable costing. Which of the above statements is (are) true?

Costs of determining whether defects exist are called:

The following data relate to Santa Mia, Inc., a new company: There were no variances during the period. Required: A. Determine the number of units in the ending finished-goods inventory. B. Calculate the cost of the ending finished-goods inventory under (1) variable costing and (2) absorption costing. C. Determine the company's variable-costing income. D. Determine the company's absorption-costing income.

On an absorption-costing income statement, fixed overhead costs are period costs.

Consider the statements that follow. 1. Variable selling costs are expensed when incurred. 2. The income statement discloses a company's contribution margin. 3. Fixed manufacturing overhead is attached to each unit produced. 4. Direct labor becomes part of a unit's cost. 5. Sales revenue minus cost of goods sold equals contribution margin. 6. This method must be used for external financial reporting. 7. Fixed selling and administrative expenses are treated in the same manner as fixed manufacturing overhead. 8. This method is sometimes called full costing. 9. This method requires the calculation of a fixed manufacturing cost per unit. Required: A. Relate only to absorption costing. B. Relate only to variable costing. C. Relate to both absorption costing and variable costing. D. Relate to neither absorption costing nor variable costing.

Income reported under absorption and variable costing can be reconciled by focusing on the effects of the five places where the two statements differ.

ProTech began business at the start of the current year. The company planned to produce 40,000 units, and actual production conformed to expectations. Sales totaled 37,000 units at $42 each. Costs incurred were: - If there were no variances, the company's absorption-costing income would be:

Total quality management or TQM refers to the broad set of management and control processes designed to focus the entire organization and all of its employees on providing products or services that do the best possible job of satisfying the customer.

The quality of conformance refers to how well a product is conceived or designed for its intended use.

Consider the following comments about absorption- and variable-costing income statements: I. A variable-costing income statement discloses a firm's contribution margin. II. Cost of goods sold on an absorption-costing income statement includes fixed costs. III. The amount of variable selling and administrative cost is the same on absorption- and variable-costing income statements. Which of the above statements is (are) true?

Foxtrot reported $65,000 of income for the year by using absorption costing. The company had no beginning inventory, planned and actual production of 20,000 units, and sales of 18,000 units. Standard variable manufacturing costs were $20 per unit, and total budgeted fixed manufacturing overhead was $100,000. If there were no variances, income under variable costing would be:

Use the following information to answer the following Questions Fort Smith Technologies incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: -Fort Smith's per-unit inventoriable cost under absorption costing is:

Which of the following product-costing systems is/are required for tax purposes?

The following costs were incurred by Home Master, a company that makes washing machines. a. The company requires each machine to complete 5 spin cycles before it is boxed and shipped. b. The company replaced switches on 10% of machines sold last year. c. Cost of rewiring the machines that failed the 5-spin cycle test. d. The company sent its machine inspectors to a two-week training program on the new model that is to be released this year. It is hoped that this will lower the defect rate on the new model. Required: Classify each of these costs as a prevention, appraisal, internal failure, or external failure cost.

Which of the following conditions would cause absorption-costing income to be lower than variable-costing income?