Exam 21: Variable Costing

Chou Computer Services provides services to corporate and individual customers.During the month of June,the corporate business segment provided services to 300 customers and earned $60,000 in revenue.The individual business segment provided services to 400 customers and earned $35,000 in revenue.The variable costs for the corporate and individual business segments amounted to $32,500 and $25,300,respectively.In addition,the fixed costs of the company amounted to $8000.The contribution margin ratios of the corporate segment and individual segment are ________,respectively.(Round your answers two decimal places.)

Barrett,Inc.reports the following information for the year ended December 31: Beginning Finished Goods Inventory 60 units Units produced 400 units Units sold 460 units Sales price \ 160 per unit Direct materials \ 30 per unit Direct labor \ 12 per unit Variable manufacturing overhead \ 15 per unit Fixed manufacturing overhead \ 15,900 per year Variable selling and administrative costs \ 10 per unit Fixed selling and administrative costs \ 12,500 per year The beginning Finished Goods Inventory costs were $3300 under absorption costing and $3420 under variable costing. What is the operating income using variable costing?

Arianell,Inc.reports the following information for August: Sales Revenue \ 800,000 Variable Cost of Goods Sold 110,000 Fixed Cost of Goods Sold 45,000 Variable Selling and Administrative Costs 100,000 Fixed Selling and Administrative Costs 70,000 Calculate the gross profit for August using absorption costing.

Which of the following statements is true of absorption and variable costing methods?

Absorption costing considers ________ as product costs.

Variable costing can also be used in service companies,especially in making short-term decisions.

In service companies,variable costing can be used for profitability analysis and contribution margin analysis.

The traditional income statement format calculates operating income as gross profit minus selling and administrative expenses.

Which of the following statements is true of variable costing?

By separating costs by behavior,fixed and variable,a service company can calculate the contribution margin ratio by dividing the contribution margin by revenues.

Verge,Inc.has two products-Le Cadre and La Bougie.Financial data for both the products follow: Le Cadre La Bougie Units sold 2200 units 600 units Sales price per unit \ 500 \ 1200 Variable manufacturing cost per unit 320 750 Sales commission (\% of sales) 7\% 4\% Verge has two sales representatives-Rosemary Wilson and Maria Blanco.Each representative sold a total of 1400 units during the month of March.Rosemary had a sales mix of 60% Le Cadre and 40% La Bougie.Maria had a sales mix of 80% Le Cadre and 20% La Bougie.Based on the above information,calculate Rosemary's total contribution to company profits.

Under variable costing,the units in the beginning Finished Goods Inventory contain fixed manufacturing overhead costs.

Healthy Environs Company provides cleaning services for residential and commercial customers.Following are data for the month of June: Residential Commercial Total Number of customers 600 400 1,000 Service revenue \ 48,000 \ 40,000 \ 88,000 Variable costs Contribution margin 34,000 18,000 52,000 Fixed costs Operating income For each type of customer,determine both the contribution margin per customer and the contribution margin ratio.Round to two decimal places.Show your computations.What type of service is more profitable?

Absorption costing considers fixed selling and administrative costs as product costs.

Variable costing is used for external reporting purposes,and absorption costing is used for internal decision-making purposes.

When setting sales prices in the long run,the sales price must cover the full cost-including fixed costs.

Period costs under the variable costing method include ________.

Which of the following is true of the traditional format of the income statement?

When units produced are less than units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.

Locklear,Inc.reports the following information for the year ended December 31: Units sold 620 units Sales price \ 130 per unit Direct materials \ 28 per unit Direct labor \ 8 per unit Variable manufacturing overhead \ 13 per unit Fixed manufacturing overhead \ 12 per unit Variable selling and administrative costs \ 6 per unit Fixed selling and administrative costs \ 12,600 per year The operating income calculated using variable costing and absorption costing amounted to $10,000 and $12,700,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year.