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

Which of the following is not a type of quality cost?

Which of the following statements pertain to variable costing?

Consider the following statements about absorption- and variable-costing income: I. Yearly income reported under absorption costing will differ from income reported under variable costing if production and sales volumes differ. II. In the long-run, total income reported under absorption costing will often be close to that reported under variable costing. III. Differences in income under absorption and variable costing can often be reconciled by multiplying the change in inventory (in units) by the variable manufacturing overhead cost per unit. Which of the above statements is (are) true?

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

Take Two manufactures electrical switches for a variety of purposes. The following costs related to maintaining product quality were incurred in April. Required: Prepare a quality-cost report.

Use the following information to answer the following Questions Favaz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow. -The income (loss) under absorption costing is:

On a variable-costing income state?ment, the cost of goods sold is measured at variable cost, which includes direct material, direct labor, and variable manufacturing overhead.

On a variable-costing income state?ment, fixed overhead is not treated as a period cost.

All of the following are inventoried under variable costing except:

Consider the following comments about absorption- and variable-costing income statements: I. A variable-costing income statement discloses a firm's gross 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?

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

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 variable costing is:

Cost-volume-profit analysis and break-even calculations account for fixed manufacturing overhead as a lump sum.

When discussing the costs of quality, the costs of determining whether defects exist are known as appraisal costs.

Absorption and variable costing are two different methods of measuring income and costing inventory. Required: A. Product costs are defined as costs associated with the manufacturing process. How does the operational definition of product cost differ between absorption costing and variable costing? B. An absorption-costing income statement will report gross profit or gross margin whereas a variable-costing income statement will report contribution margin. What is the difference between these terms?

Variable costing of inventory and absorption costing of inventory is relevant for which of the following types of businesses?

Carrington, Inc. began business at the start of the current year and maintains its accounting records on an absorption-cost basis. The following selected information appeared on the company's income statement and end-of-year balance sheet: Carrington achieved its planned production level for the year. The company's fixed manufacturing overhead totaled $141,000, and the firm paid a 10% commission based on gross sales dollars to its sales force. Required: A. How many units did Carrington plan to produce during the year? B. How much fixed manufacturing overhead did the company apply to each unit produced? C. Compute Carrington's cost of goods sold. D. How much variable cost did the company attach to each unit manufactured?

Razor Technologies reported $106,000 of income for the year by using variable costing. The company had no beginning inventory, planned and actual production of 50,000 units, and sales of 47,000 units. Standard variable manufacturing costs were $15 per unit, and total budgeted fixed manufacturing overhead was $150,000. If there were no variances, income under absorption costing would be:

Variable manufacturing overhead becomes part of a unit's cost when variable costing is used.

When units sold exceed units produced, absorption-costing income will be lower than variable-costing income.