Exam 6: Variable Costing for Management Analysis

The Excelsior Company has three salespersons. Average sales price per unit sold, average variable manufacturing costs per unit, and number of units sold for each salesperson are shown below.   Commissions are earned according to the following schedule: Prepare a contribution by salesperson report.

In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:

In the absorption costing income statement, deduction of the cost of goods sold from sales yields gross profit.

Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales were 12,000 units. Determine (a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption costing income from operations.

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the quantity factor.

For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will equal the income from operations reported under variable costing.

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields manufacturing margin.

Which of the following is(are) reason(s) for easy identification and control of variable manufacturing costs under the variable costing method?

Which of the following causes the difference between the planned and actual contribution margin?

Under variable costing, which of the following costs would not be included in finished goods inventory?

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured:

The level of inventory of a manufactured product has increased by 5,000 units during a period. The following data are also available: What would be the effect on income from operations if variable costing is used rather than absorption costing?

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement?

Under absorption costing, the amount of income reported from operations can be increased by producing more units than are sold.

In contribution margin analysis, the unit price or unit cost factor is computed as:

If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is the manufacturing cost per unit if: (a) 20,000 units are manufactured and the company uses the variable costing concept? (b) 25,000 units are manufactured and the company uses the variable costing concept? (c) 20,000 units are manufactured and the company uses the absorption costing concept? (d) 25,000 units are manufactured and the company used the absorption costing concept?

The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured:

Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.

On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing: If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement using variable costing.

Tony's Company has the following information for March: Determine the March (a) manufacturing margin (b) contribution margin (c) income from operations for Tony's Company.