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

Jordan Manufacturing has the following cost information for year 20X9: During 20X9, Jordan produced 12,500 units, out of which 11,000 were sold for $60 each. What is Jordan's net income assuming the company uses absorption costing:

The underlying difference between absorption costing and variable costing lies in the treatment of:

Sawyer Industries began business at the start of the current year.The company planned to produce 25,000 units, and actual production conformed to expectations.Sales totaled 22,000 units at $30 each.Costs incurred were: If there were no variances, the company's absorption-costing income would be:

Xenon Enterprises (XE) produces two extruding machines that are popular with food processors: No.616 and No.717.Machine No.616 has an average selling price of $160,000, whereas No.717 typically sells for approximately $155,000.The company is extremely focused on quality and has provided the following information: Required: a.Classify the preceding costs as prevention, appraisal, internal failure, or external failure. b.Using the classifications in requirement (1), compute XE's quality costs for machine No.616 in dollars and as a percentage of sales revenues.Also calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. c.Repeat requirement (b) for machine No.717. d.Comment on your findings, noting whether the company is "investing" its quality expenditures differently for the two machines. e.Quality costs can be classified as observable or hidden.What are hidden quality costs, and how do these costs differ from observable costs?

Assuming that the number of units produced is less than the number of units sold, which of the following statements is true when comparing net income using absorption and variable costing?

Which of the following statements pertain to both variable costing and absorption costing?

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

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?

Mallory Industries has the following cost information for the year just ended: During the year, Mallory produced 10,000 units, out of which 9,100 were sold for $50 each. What is net income under variable costing?

All of the following are expensed under variable costing except:

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

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 variable-costing income would be:

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

Which of the following statements about environmental costs is false?

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:

An analytical method that aims at achieving near-perfect results in a production process is known as the zero- defect perspective.

Which of the following descriptions would not be found on an income statement prepared using variable costing?

Cagney Industries has the following cost information for the year just ended: During the year, Cagney produced 6,000 units, out of which 5,400 were sold for $20 each. What is net income under absorption costing?

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

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: