Exam 6: Variable Costing for Management Analysis

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

The level of inventory of a manufactured product has increased by 8,000 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?

On the variable costing income statement, variable costs are deducted from contribution margin to yield manufacturing margin.

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the contribution margin that would be reported on the variable costing income statement?

A business operated at 100% of capacity during its first month and incurred the following costs: If 75 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

In variable costing, fixed costs do not become part of the cost of goods manufactured, but are considered an expense of the period.

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Management may use both absorption and variable costing methods for analyzing a particular product.

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.

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, what is the amount of inventory that would be reported on the absorption costing balance sheet?

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the income from operations that would be reported on the variable costing income statement?

Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory.