Exam 8: Absorption and Variable Costing, and Inventory Management

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.

Match the type of income statement to the costs it includes. -Direct materials for units sold

What is the primary difference between variable and absorption costing?

The ___________________ income statement groups expenses according to function.

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 variable costing method?

Bailey Company incurred the following costs in manufacturing desk calculators: During the period, the company produced and sold 2,000 units. -Refer to Figure 8-6. What is the inventory cost per unit using variable costing?

Which of the following is not a traditional reason for carrying inventory?

During the most recent year, Boston Corp. had the following data: Required: A. How many units are in ending inventory? B. Using absorption costing, calculate the per-unit product cost. What is the value of ending inventory? C. Using variable costing, calculate the per-unit product cost. What is the value of ending inventory? D. Prepare an income statement using absorption costing. E. Prepare an income statement using variable costing.

The formula for ordering cost is the

Tyler Company has the following information pertaining to its two product lines for last year: Common expenses are $105,000 for the year. -Refer to Figure 8-11. What is the income for Tyler Company?

Segment margin is equal to segment sales revenue minus

Loring Company had the following data for the month: Fixed overhead is $4,000 per month; it is applied to production based on normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14. Selling and administrative expense for the month, all fixed, totaled $3,600. -Refer to Figure 8-2. What is operating income under variable costing?

The profit contribution each segment makes toward covering a company's common fixed costs is called ______________.

Which of the following statements is true?

A ____________ is a subunit of a company of sufficient importance to warrant the production of performance reports.

________________ is the time required to receive the economic order quantity once an order is placed.

Prepare a segmented income statement for Mario Co. for the coming year, using variable costing. A sales commission of 2% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $32,000 for the leather jackets and $66,000 for the suede jackets. Common fixed overhead for the factory was estimated to be $83,000 and common selling and administrative expense was estimated to be $14,000. Required: Prepare a segmented income statement for Mario Co. for the coming year, using variable costing.

Last year, Fabre Company produced 20,000 units and sold 18,000 units at a price of $12. Costs for last year were as follows: Fixed factory overhead is applied based on expected production. Last year, Fabre expected to produce 20,000 units. -Refer to Figure 8-1. What is operating income for last year under absorption costing?

The inventory cost that can include insurance, inventory taxes, and obsolescence is called

The following information pertains to Mayberry Corporation: -Refer to Figure 8-4. What is the value of the ending inventory using the absorption costing method?