Exam 6: Variable Costing and Segment Reporting: Tools for Management

Grandin Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 44,000 units and sold 41,000 units. The company's only product is sold for $242 per unit.The company is considering using either super-variable costing or a variable costing system that assigns $24 of direct labor cost to each unit that is produced. Which of the following statements is true regarding the net operating income in the first year?

When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will:

Borunda Corporation has provided the following data for its two most recent years of operation: Required: a.Assume the company uses absorption costing. Prepare an income statement for each year. b. Assume the company uses variable costing. Prepare an income statement for each year. c. Prepare a report in good form reconciling the variable costing and absorption costing net incomes.

Succulent Juice Corporation manufactures and sells premium tomato juice by the gallon. Succulent just finished its first year of operations. The following data relates to this first year: Required: Using absorption costing, prepare Succulent Juice Corporation's income statement for the year.

Neef Corporation has provided the following data for its two most recent years of operation: The net operating income (loss) under absorption costing in Year 2 is closest to:

Norenberg Corporation manufactures a single product. The following data pertain to the company's operations over the last two years: What was the absorption costing net operating income this year?

Michelman Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 34,000 units and sold 31,000 units. The company's only product is sold for $254 per unit.The company is considering using either super-variable costing or an absorption costing system that assigns $28 of direct labor cost and $75 of fixed manufacturing overhead to each unit that is produced. Which of the following statements is true regarding the net operating income in the first year?

Paparelli Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 40,000 units and sold 33,000 units. The company's only product is sold for $240 per unit.The net operating income for the year under super-variable costing is:

Union Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 24,000 units and sold 17,000 units. The company's only product is sold for $232 per unit.The net operating income for the year under super-variable costing is:

Dallavalle Corporation manufactures and sells one product. The following information pertains to the company's first year of operations: The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 32,000 units and sold 31,000 units. The company's only product is sold for $238 per unit.Assume that the company uses a variable costing system that assigns $10 of direct labor cost to each unit that is produced. The unit product cost under this costing system is:

Souffront Corporation manufactures and sells one product. In the company's first year of operations, the variable cost consisted solely of direct materials of $97 per unit. The annual fixed costs were $1,416,000 of direct labor cost, $3,776,000 of fixed manufacturing overhead expense, and $1,650,000 of fixed selling and administrative expense. The company does not have any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, the company produced 59,000 units and sold 55,000 units. The company's only product is sold for $251 per unit. The net operating income for the year under super-variable costing is:

Quates Corporation produces a single product and has the following cost structure: Required:Compute the unit product cost under absorption costing. Show your work!

Miller Corporation produces a single product. The company had the following results for its first two years of operation: In Year 1, the company produced and sold 40,000 units of its only product; in Year 2, the company again sold 40,000 units, but increased production to 50,000 units. The company's variable production cost is $5 per unit and its fixed manufacturing overhead cost is $600,000 a year. Fixed manufacturing overhead costs are applied to the product on the basis of each year's unit production (i.e., a new fixed manufacturing overhead rate is computed each year). Variable selling and administrative expenses are $2 per unit sold. Required: a.Compute the unit product cost for each year under absorption costing and under variable costing. b. Prepare a contribution format income statement for each year using variable costing. c. Reconcile the variable costing and absorption costing income figures for each year. d. Explain why the net operating income for Year 2 under absorption costing was higher than the net operating income for Year 1, although the same number of units were sold in each year.

Ober Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Required:a. Prepare a contribution format income statement for the month using variable costing.b. Prepare an income statement for the month using absorption costing.

A company that produces a single product had a net operating income of $65,000 using variable costing and a net operating income of $95,000 using absorption costing. Total fixed manufacturing overhead was $60,000 and production was 10,000 units. This year was the first year of operations. Between the beginning and the end of the year, the inventory level:

Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole?

Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Assume that direct labor is a variable cost.Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?

Tubaugh Corporation has two major business segments--East and West. In December, the East business segment had sales revenues of $690,000, variable expenses of $352,000, and traceable fixed expenses of $104,000. During the same month, the West business segment had sales revenues of $140,000, variable expenses of $56,000, and traceable fixed expenses of $24,000. The common fixed expenses totaled $162,000 and were allocated as follows: $89,000 to the East business segment and $73,000 to the West business segment.The contribution margin of the West business segment is:

Variable costing net operating income is usually closer to the net cash flow of a period than is absorption costing net operating income.

Gardella Corporation has two divisions: Domestic Division and Foreign Division. The following data are for the most recent operating period: The common fixed expenses have been allocated to the divisions on the basis of sales.The company's overall break-even sales is closest to: