Exam 3: Predetermined Overhead Rates, Flexible Budgets, and Absorptionvariable Costing

Rosewood Corporation Rosewood Corporation produces a single product.The following cost structure applied to its first year of operations: Variable costs: SG\&A                  $ 2 per unit Prochuction          $ 4 per unit Fixed costs (total cost incurre dor the year): SG\&A                     $ 14,000 Production                  $ 20.000 Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation manufactured 5,000 units and sold 4,000 in the current year.If Rosewood employs a costing system based on variable costs,the company would end the current year with a finished goods inventory of

A mixed cost has which of the following components? Variable component      Fixed component

How will a favorable volume variance affect net income under each of the following methods? Absorption       Variable

An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a

Rosewood Corporation Rosewood Corporation produces a single product.The following cost structure applied to its

Variable costs:
SG&A	$2 per unit
Production	$4 per unit
Fixed costs (total cost incurred for the year):
SG&A	$14,000
Production	$20,000

Refer to Rosewood Corporation.Assume for this question only that Rosewood Corporation produced 5,000 units and sold 4,500 units in the current year.If Rosewood uses absorption costing,it would deduct period costs of

If overapplied factory overhead is material,the account is closed by a credit to Cost of Goods Sold.

Under absorption costing,if sales remain constant from period 1 to period 2,the company will report a larger income in period 2 when

Hahn Corporation Hahn Corporation produces a single product that sells for $7.00 per unit.Standard capacity is 100,000 units per year;100,000 units were produced and 80,000 units were sold during the year.Manufacturing costs and selling and administrative expenses are presented below. There were no variances from the standard variable costs.Any under- or overapplied overhead is written off directly at year-end as an adjustment to cost of goods sold.

	Fixed costs	Variable costs
Direct material	$0	$1.50 per unit produced
Direct labor	0	1.00 per unit produced
Manufacturing overhead	$150,000	0.50 per unit produced
Selling & Administration expense	80,000	0.50 per unit sold

Hahn Corporation had no inventory at the beginning of the year. Refer to Hahn Corporation.What is the net income under absorption costing?

The costing technique that treats all manufacturing costs as inventoriable is referred to as _________________ or ___________ costing. or

The FASB requires which of the following to be used in preparation of external financial statements?

Delta,Epilson,and Sigma Companies Three new companies (Delta,Epilson,and Sigma)began operations on January 1 of the current year.Consider the following operating costs that were incurred by these companies during the complete calendar year:

	Delta Company	Epsilon Company	Sigma Company
Production in units	10,000	10,000	10,000
Sales price per unit	$10	$10	$10
Fixed production costs	$10,000	$20,000	$30,000
Variable production costs	$30,000	$20,000	$10,000
Variable SG&A	$1/unit	$2/unit	$3/unit
Fixed SG&A	$30,000	$20,000	$10,000

Refer to Delta,Epilson,and Sigma Companies.Based on sales of 7,000 units,which company will report the greater income before income taxes if variable costing is used?

Wyatt Corporation Wyatt Corporation has the following standard costs associated with the manufacture and sale of one of its products:

Direct material	$3.00 per unit
Direct labor	2.50 per unit
Variable manufacturing overhead	1.80 per unit
Fixed manufacturing overhead	4.00 per unit (based on an estimate of 50,000 units per year)
Variable selling expenses	.25 per unit
Fixed SG&A expense	$75,000 per year

During its first year of operations Wyatt manufactured 51,000 units and sold 48,000. The selling price per unit was $25. All costs were equal to standard. Refer to Wyatt Corporation.The volume variance under absorption costing is

One reason annual overhead application rates are used is

If production exceeds sales,absorption costing net income is less than variable costing net income.

A flexible budget is a planning document that presents expected variable and fixed overhead costs at different activity levels.

Lawson Corporation Lawson Corporation has the following data for use of its machinery

Month	Usage	Cost
Jun	600	$750
Jul	650	775
Aug	420	550
Sept	500	650
Oct	450	570

Refer to Lawson Corporation.Using the high-low method,compute the fixed cost element (to the nearest whole dollar).

Under variable costing,which of the following are costs that can be inventoried?

If overapplied factory overhead is immaterial,the account is closed by a debit to Cost of Goods Sold.

Delta,Epilson,and Sigma Companies Three new companies (Delta,Epilson,and Sigma)began operations on January 1 of the current year.Consider the following operating costs that were incurred by these companies during the complete calendar year:

	Delta Company	Epsilon Company	Sigma Company
Production in units	10,000	10,000	10,000
Sales price per unit	$10	$10	$10
Fixed production costs	$10,000	$20,000	$30,000
Variable production costs	$30,000	$20,000	$10,000
Variable SG&A	$1/unit	$2/unit	$3/unit
Fixed SG&A	$30,000	$20,000	$10,000

Refer to Delta,Epilson,and Sigma Companies.Based on sales of 7,000 units,which company will report the greater income before income taxes if absorption costing is used?

Since overhead costs are indirect costs,