Exam 8: Absorption and Variable Costing, and Inventory Management

Figure 8-8. Steele Corporation has the following information for January, February, and March: Production costs per unit (based on 10,000 units) are as follows: There were no beginning inventories for January, and all units were sold for $50. Costs are stable over the three months. -Refer to Figure 8-8. What is the February contribution margin for Steele Corporation using the variable costing method?

The two major costs associated with inventory are

Figure 8-4. The following information pertains to Mayberry Corporation: -Refer to Figure 8-4. Absorption costing income would be ____ variable costing income.

_______________ assigns all manufacturing costs to the product.

Figure 8-5. Sanders Company has the following information for last year: There were no beginning inventories. -Refer to Figure 8-5. What is the income for Sanders using the absorption costing method?

Redding Company has two divisions with the following segment margins for the current year: Northern, $200,000; Southern, $400,000. Common expenses of the company are $50,000. What is Redding Company's income?

Lost sales and costs of expediting shipments of goods are examples of _______________.

Figure 8-5. Sanders Company has the following information for last year: There were no beginning inventories. -Refer to Figure 8-5. What is the value of ending inventory for Sanders using the absorption costing method?

The variable costing income statement for Jackson Company for 2011 is as follows: Selected data for 2011 concerning the operations of the company are as follows: Required: Prepare an absorption costing income statement for 2011.

Expenses that persist even if one of the segments to which they relate is eliminated are known as ________________.

MATCHING Match the type of income statement to the costs it includes. a. Variable costing income statement b. Absorption costing income statement c. Both types of income statements -Variable selling expense

The costs of not having a product available when demanded by a customer are called stockout costs.

McKay Company produces curling irons. The plastic handles used to produce the curling irons are purchased from an outside supplier. Each year, 45,000 handles are used at the rate of 150 handles per day. Some days as many as 180 handles are used. On average it takes 4 days after an order is placed for the inventory to arrive at McKay Company. Required: A. Calculate the reorder point without safety stock. B. Calculate the amount of safety stock. C. Calculate the reorder point with safety stock.

Rudd Company uses 40,000 micro-chips each year in its production of digital cameras. The cost of placing an order is $75. The cost of holding one unit of inventory for one year is $8. Currently Rudd places 20 orders of 2,000 units per order. Required: A. Compute the annual ordering cost. B. Compute the annual carrying cost. C. Compute the total cost of Rudd's current inventory policy. D. Compute the economic order quantity. E. Compute the order cost and the carrying cost for the EOQ. F. How much money does using the EOQ policy save the company over the policy of purchasing 2,000 micro-chips per order?

Under a JIT system,

Figure 8-12. Assume the following information for a product line: -Refer to Figure 8-12. What is the contribution margin of the product line?

MATCHING Match the type of income statement to the costs it includes. a. Variable costing income statement b. Absorption costing income statement c. Both types of income statements -Variable overhead for units sold

Match each statement with the correct item below. a. the costs of not having a product available when demanded by a customer b. the costs of carrying inventory c. approach that maintains goods should be pulled through the system by present demand d. the number of units in the order quantity that minimizes the total cost e. the costs of placing and receiving an order -Carrying costs

Ellie Manufacturing Company produces three products: A, B, and C. The income statement for most recent year is as follows: The sales, contribution margin ratios, and direct fixed expenses for the three types of products are as follows: Required: Prepare income statements segmented by products. Include a column for the entire firm in the statement.

A major drawback to the JIT inventory approach is that it increases carrying costs.