Question 1

Variable costing considers all costs to be product costs.

Accepted Answer

A) True 
 B)False

Question 2

Selling and administrative expenses (such as commissions paid to sales personnel) are considered part of product costs under variable costing.

Accepted Answer

A) True 
 B)False

Question 3

Pat's Hats produces sun visors. Production data for the first month follow:
  
-What is the October net income using variable costing?

Accepted Answer

A)  $97,000 
B)  $97,200 
C)  $137,200 
D)  $137,000 
A)  $97,000 
B)  $97,200 
C)  $137,200 
D)  $137,000

Question 4

Burrito-Blast makes bean and cheese burritos that it sells to grocery stores. The burritos sell for $1 each. Burrito-Blast had beginning inventory of $20,000 on June 1 for 80,000 burritos. During June the company produced 500,000 burritos. June production costs are as follows:
 
- The company's June 30 ending inventory consists of 20,000 burritos. Assuming they use FIFO costing, calculate the June net income using absorption costing?

Accepted Answer

A)  $358,200 
B)  $379,000 
C)  $340,400 
D)  $380,600 
A)  $358,200 
B)  $379,000 
C)  $340,400 
D)  $380,600

Question 5

Burrito-Blast makes bean and cheese burritos that it sells to grocery stores. The burritos sell for $1 each. Burrito-Blast had beginning inventory of $20,000 on June 1 for 80,000 burritos. During June the company produced 500,000 burritos. June production costs are as follows:
 
- The company's June 30 ending inventory consists of 20,000 burritos. Assuming they use FIFO costing, calculate the June 30 ending inventory value using absorption costing?

Accepted Answer

A)  $5,000 
B)  $4,000 
C)  $5,600 
D)  $20,000 
A)  $5,000 
B)  $4,000 
C)  $5,600 
D)  $20,000

Question 6

Harold's produces windmills that store power for residential use. Production data for the first month follow:
 
- What is the value of the May ending inventory using absorption costing?

Accepted Answer

A)  $3,900 
B)  $4,200 
C)  $61,500 
D)  $60,000 
A)  $3,900 
B)  $4,200 
C)  $61,500 
D)  $60,000

Question 7

Hi-Tech manufactures basic cell phones for cell phone service providers. Data for March and April's production follows:
  Hi-Tech started March with 1,000 cell phones that had variable costs of $28.00 per phone and fixed manufacturing costs of $2.00 per phone. Hi-Tech uses a FIFO cost flow.
-
What is the Cost of Goods Sold for April, 2012 using absorption costing?

Accepted Answer

A)  $1,360,000 
B)  $1,311,000 
C)  $1,288,600 
D)  $1,369,200 
A)  $1,360,000 
B)  $1,311,000 
C)  $1,288,600 
D)  $1,369,200

Question 8

During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000.
- If variable production costs totaled $100,000, what is the cost per unit using variable costing?

Accepted Answer

A)  $2.00 
B)  $5.00 
C)  $7.00 
D)  $7.35 
A)  $2.00 
B)  $5.00 
C)  $7.00 
D)  $7.35

Question 9

If a company's beginning and ending inventory count is the same and production cost per unit are the same; then, the ending inventory amount on the balance sheet must be the same dollar amount as the beginning inventory dollar amount.

Accepted Answer

A) True 
 B)False

Question 10

Roberta's Hot Stuff began making hot and sour soup in August, 2012. The soup sells for $2 for a large package. Variable production costs are $0.70 per package. Roberta's Hot Stuff incurs monthly fixed manufacturing overhead costs of $40,000 and fixed selling and administrative cost of $8,000. On August 31, 2012 ending inventory was 10,000 soup packages. Assume Roberta's Hot Stuff produced 400,000 soup packages in September. Roberta's Hot Stuff sold 406,000 of the soup packages in September.
- Calculate the September net income using absorption costing.

Accepted Answer

A)  $479,800 
B)  $479,200 
C)  $487,200 
D)  $527,800 
A)  $479,800 
B)  $479,200 
C)  $487,200 
D)  $527,800

Question 11

Pat's Hats produces sun visors. Production data for the first month follow:
  
-What is the October net income using absorption costing?

Accepted Answer

A)  $97,000 
B)  $97,200 
C)  $137,200 
D)  $137,000 
A)  $97,000 
B)  $97,200 
C)  $137,200 
D)  $137,000

Question 12

Hi-Tech manufactures basic cell phones for cell phone service providers. Data for March and April's production follows:
  Hi-Tech started March with 1,000 cell phones that had variable costs of $28.00 per phone and fixed manufacturing costs of $2.00 per phone. Hi-Tech uses a FIFO cost flow.
-
What is the value of the ending inventory on March 31, 2012 using absorption costing?

Accepted Answer

A)  $30,000 
B)  $33,000 
C)  $31,000 
D)  $32,500 
A)  $30,000 
B)  $33,000 
C)  $31,000 
D)  $32,500

Question 13

If a company's beginning and ending inventory count is the same and production cost per unit are the same; then, the cost of goods sold must be the same dollar amount whether using variable or absorption costing

Accepted Answer

A) True 
 B)False

Question 14

During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000.
- If variable production costs were $100,000, an absorption costing income statement would report the variable manufacturing costs as a:

Accepted Answer

A)  part of cost of goods sold. 
B)  $85,000 deduction from sales revenue to obtain contribution margin. 
C)  $100,000 deduction from sales revenue to obtain contribution margin. 
D)  $100,000 deduction from sales revenue to obtain gross profit. 
A)  part of cost of goods sold. 
B)  $85,000 deduction from sales revenue to obtain contribution margin. 
C)  $100,000 deduction from sales revenue to obtain contribution margin. 
D)  $100,000 deduction from sales revenue to obtain gross profit.

Question 15

Pat's Hats produces sun visors. Production data for the first month follow:
 
- What is the variable cost per hat for October?

Accepted Answer

A)  $2.25 
B)  $2.50 
C)  $3.00 
D)  $5.00 
A)  $2.25 
B)  $2.50 
C)  $3.00 
D)  $5.00

Question 16

Hi-Tech manufactures basic cell phones for cell phone service providers. Data for March and April's production follows:
  Hi-Tech started March with 1,000 cell phones that had variable costs of $28.00 per phone and fixed manufacturing costs of $2.00 per phone. Hi-Tech uses a FIFO cost flow.
-
What is the Cost of Goods Sold for March, 2012 using variable costing?

Accepted Answer

A)  $1,320,000 
B)  $1,240,000 
C)  $1,317,000 
D)  $1,237,000 
A)  $1,320,000 
B)  $1,240,000 
C)  $1,317,000 
D)  $1,237,000

Question 17

GAAP requires that we assign fixed and variable manufacturing costs to the product.

Accepted Answer

A) True 
 B)False

Question 18

Mega-Thirst produces an energy drink called Mega-Caffeine. The drinks sell to grocery stores and other retailers for $10 a case. During September, the first month of production, the company used $65,000 of aluminum cans and $35,000 of syrup, soda and caffeine. September manufacturing wages were $60,000 and variable manufacturing overhead incurred was $20,000. September's fixed manufacturing overhead costs were $70,000 and fixed selling and administrative costs were $12,000. Selling commissions were $0.25 per case. Mega-Thirst sold 46, 000 of the 50,000 cases that were produced in September for $10 per case. 
-Calculate the September ending inventory value income using absorption costing.

Accepted Answer

A)  $14,400 
B)  $0 
C)  $20,000 
D)  $15,400 
A)  $14,400 
B)  $0 
C)  $20,000 
D)  $15,400

Question 19

Burrito-Blast makes bean and cheese burritos that it sells to grocery stores. The burritos sell for $1 each. Burrito-Blast had beginning inventory of $20,000 on June 1 for 80,000 burritos. During June the company produced 500,000 burritos. June production costs are as follows:
  
-The company's June 30 ending inventory consists of 20,000 burritos. Assuming they use FIFO costing, calculate the June 30 ending inventory value using variable costing?

Accepted Answer

A)  $5,000 
B)  $4,000 
C)  $5,600 
D)  $20,000 
A)  $5,000 
B)  $4,000 
C)  $5,600 
D)  $20,000

Question 20

Mega-Thirst produces an energy drink called Mega-Caffeine. The drinks sell to grocery stores and other retailers for $10 a case. During September, the first month of production, the company used $65,000 of aluminum cans and $35,000 of syrup, soda and caffeine. September manufacturing wages were $60,000 and variable manufacturing overhead incurred was $20,000. September's fixed manufacturing overhead costs were $70,000 and fixed selling and administrative costs were $12,000. Selling commissions were $0.25 per case. Mega-Thirst sold 46, 000 of the 50,000 cases that were produced in September for $10 per case.
- Which method would result in the larger operating income and why?

Accepted Answer

A)  Variable costing- because the cost per unit is less, which means ending inventory costs are smaller 
B)  Variable costing- because the fixed manufacturing costs are all expensed during September 
C)  Absorption costing- because the cost per unit is higher, which means ending inventory costs are larger 
D)  Absorption costing- because the fixed manufacturing costs are all expensed during September 
A)  Variable costing- because the cost per unit is less, which means ending inventory costs are smaller 
B)  Variable costing- because the fixed manufacturing costs are all expensed during September 
C)  Absorption costing- because the cost per unit is higher, which means ending inventory costs are larger 
D)  Absorption costing- because the fixed manufacturing costs are all expensed during September

Variable costing considers all costs to be product costs.

Selling and administrative expenses (such as commissions paid to sales personnel) are considered part of product costs under variable costing.

Pat's Hats produces sun visors. Production data for the first month follow: -What is the October net income using variable costing?

Harold's produces windmills that store power for residential use. Production data for the first month follow: - What is the value of the May ending inventory using absorption costing?

During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000. - If variable production costs totaled $100,000, what is the cost per unit using variable costing?

If a company's beginning and ending inventory count is the same and production cost per unit are the same; then, the ending inventory amount on the balance sheet must be the same dollar amount as the beginning inventory dollar amount.

Pat's Hats produces sun visors. Production data for the first month follow: -What is the October net income using absorption costing?

If a company's beginning and ending inventory count is the same and production cost per unit are the same; then, the cost of goods sold must be the same dollar amount whether using variable or absorption costing

During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000. - If variable production costs were $100,000, an absorption costing income statement would report the variable manufacturing costs as a:

Pat's Hats produces sun visors. Production data for the first month follow: - What is the variable cost per hat for October?

GAAP requires that we assign fixed and variable manufacturing costs to the product.

Introduction to Management Accounting

Job Order Costing

Activity-Based Costing and Other Cost Management Tools

Process Costing

Cost Behavior and Cost-Volume-Profit Analysis

The Master Budget: Profit Planning

Flexible Budgets and Standard Costs

Allocating Service Department Costs and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Performance Evaluation and the Balanced Scorecard

The Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 6: Absorption and Variable Costing

Variable costing considers all costs to be product costs.

Selling and administrative expenses (such as commissions paid to sales personnel) are considered part of product costs under variable costing.

Pat's Hats produces sun visors. Production data for the first month follow: -What is the October net income using variable costing?

Harold's produces windmills that store power for residential use. Production data for the first month follow: - What is the value of the May ending inventory using absorption costing?

During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000. - If variable production costs totaled $100,000, what is the cost per unit using variable costing?

If a company's beginning and ending inventory count is the same and production cost per unit are the same; then, the ending inventory amount on the balance sheet must be the same dollar amount as the beginning inventory dollar amount.

Pat's Hats produces sun visors. Production data for the first month follow: -What is the October net income using absorption costing?

If a company's beginning and ending inventory count is the same and production cost per unit are the same; then, the cost of goods sold must be the same dollar amount whether using variable or absorption costing

During the current period, 20,000 units were produced and 17,000 units were sold. Fixed manufacturing costs incurred amounted to $40,000. - If variable production costs were $100,000, an absorption costing income statement would report the variable manufacturing costs as a:

Pat's Hats produces sun visors. Production data for the first month follow: - What is the variable cost per hat for October?

GAAP requires that we assign fixed and variable manufacturing costs to the product.

Introduction to Management Accounting

Job Order Costing

Activity-Based Costing and Other Cost Management Tools

Process Costing

Cost Behavior and Cost-Volume-Profit Analysis

The Master Budget: Profit Planning

Flexible Budgets and Standard Costs

Allocating Service Department Costs and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Performance Evaluation and the Balanced Scorecard

The Statement of Cash Flows

Financial Statement Analysis

Filters