Shore Company reports the following information regarding its production cost: $\begin{array}{ll} \text { Units produced } & 28,000 \text { units } \\ \text { Direct labor } & \$ 23 \text { per unit } \\ \text { Direct materials } & \$ 24 \text { per unit } \\ \text { Variable overhead } & \$ 280,000 \text { per unit } \\ \text { Fixed overhead } & \$ 94,920 \text { in total } \end{array}$ Compute production cost per unit under variable costing.

A) $57.00 B) $60.39 C) $47.00 D) $23.00 E) $24.00 A) $57.00 B) $60.39 C) $47.00 D) $23.00 E) $24.00

A company reports the following information for its first year of operations: $\begin{array}{ll} \text { Units produced this year } & 650 \text { units } \\ \text { Units sold this year } & 500 \text { units } \\ \text { Direct materials } & \$ 750 \text { per unit } \\ \text { Direct labor } & \$ 1,000 \text { per unit } \\ \text { Variable overhead } & ? \text { in total } \\ \text { Fixed overhead } & \$ 308,750 \text { in total } \end{array}$ If the company's cost per unit of finished goods using variable costing is $2,375, what is total variable overhead?

A) $237,500 B) $75,000 C) $312,500 D) $406,250 E) $97,500 A) $237,500 B) $75,000 C) $312,500 D) $406,250 E) $97,500

Under absorption costing, a company had the following unit costs when 8,000 units were produced. $\begin{array}{lr} \text { Direct labor } & \$ 8.50 \text { per unit } \\ \text { Direct material } & \$ 9.00 \text { per unit } \\ \text { Variable overhead } & \$ 6.75 \text { per unit } \\ \text { Fixed overhead }(\$ 60,000 / 8,000 \text { units }) &\underline{ \$ 7.50 \text { per unit }} \\ \text { Total production cost } & \underline{\$ 31.75 \text { per unit }} \end{array}$ Compute the total production cost per unit under variable costing if 20,000 units had been produced.

A) $31.75 B) $27.25 C) $26.25 D) $24.25 E) $17.50 A) $31.75 B) $27.25 C) $26.25 D) $24.25 E) $17.50

Wind Fall, a manufacturer of leaf blowers, began operations this year.During this year, the company produced 10,000 leaf blowers and sold 8,500.At year-end the company reported the following income statement using absorption costing: $\begin{array}{lr} \text { Sales } (8,500 \times \$ 45) &\$ 382,500 \\ \text { Cost of goods sold }(8,500 \times \$ 20) &\underline{170,000} \\ \text { Gross margin } &\$ 212,500 \\ \text { Selling and administrative expenses } &\underline{60,000 }\\ \text { Net income } &\underline{\$ 152,500} \end{array}$ Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced).Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

A) $146,500 B) $158,500 C) $237,500 D) $206,500 E) $246,500 A) $146,500 B) $158,500 C) $237,500 D) $206,500 E) $246,500

Red and White Company reported the following monthly data: $\begin{array}{ll} \text { Units produced } & 2,000 \text { units } \\ \text { Sales price } & \$ 25 \text { per unit } \\ \text { Direct materials } & \$ 1 \text { per unit } \\ \text { Direct labor } & \$ 2 \text { per unit } \\ \text { Variable overhead } & \$ 3 \text { per unit } \\ \text { Fixed overhead } & \$ 8,000 \text { in total } \end{array}$ -What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?

A) $(1,380) B) $(2,000) C) $ 2,700 D) $ 6,620 E) $ 10,620 A) $(1,380) B) $(2,000) C) $ 2,700 D) $ 6,620 E) $ 10,620

Dataport Company reports the following annual cost data for its single product: $\begin{array}{ll} \text { Normal production and saleslevel } & 89,000 \text { units } \\ \text { Direct materials } & \$ 14.00 \text { per unit } \\ \text { Direct labor } & \$ 21.00 \text { per unit } \\ \text { Variable overhead } & \$ 27.00 \text { per unit } \\ \text { Fixed overhead } & \$ 3,738,000 \text { in total } \end{array}$ This product is normally sold for $230 per unit.If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

$3,738,000/89,000 units = $42 FOH per un

Sea Company reports the following information regarding its production cost. $\begin{array}{ll} \text { Units produced } & 42,000 \text { units } \\ \text { Direct labor } & \$ 35 \text { per unit } \\ \text { Direct materials } & \$ 28 \text { per unit } \\ \text { Variable overhead } & \$ 17 \text { per unit } \\ \text { Fixed overhead } & \$ 105,000 \text { in total } \end{array}$ Compute production cost per unit under variable costing.

A) $28.00 B) $82.50 C) $80.00 D) $63.00 E) $35.00 A) $28.00 B) $82.50 C) $80.00 D) $63.00 E) $35.00

Exam 6: Variable Costing and Performance Reporting

How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences. (a)Units produced equal units sold (b)Units produced exceed units sold (c)Units produced are less than units sold

Free

(Essay)

4.9/5

(33)

Question 1

Correct Answer:

Verified

(a)Income is identical under variable costing and absorption costing when the units produced equal the units sold.
(b)When units produced exceed units sold, income under variable costing is less than income under absorption costing.This is because some of fixed overhead was allocated to ending inventory under absorption costing, but all of fixed overhead was expensed under variable costing.
(c)When units produced are less than units sold, income under variable costing is greater than income under absorption costing.This is because absorption costing is expensing some of a prior period's fixed overhead in addition to the current period's fixed overhead, while variable costing is only expensing the current period's fixed overhead.

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units, respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

Free

(Essay)

4.8/5

(40)

Question 2

Correct Answer:

Verified

$678,000 + (4,200 units x $.50)- (5,000 x $.50)= $677,600

Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

Free

(Multiple Choice)

4.8/5

(40)

Question 3

Correct Answer:

Verified

D

Shore Company reports the following information regarding its production cost: Units produced 28,000 units Direct labor \ 23 per unit Direct materials \ 24 per unit Variable overhead \ 280,000 per unit Fixed overhead \ 94,920 in total Compute production cost per unit under variable costing.

(Multiple Choice)

4.9/5

(34)

Question 4

The use of absorption costing can result in misleading product cost information.

(True/False)

4.8/5

(38)

Question 5

A company reports the following information for its first year of operations: Units produced this year 650 units Units sold this year 500 units Direct materials \ 750 per unit Direct labor \ 1,000 per unit Variable overhead ? in total Fixed overhead \ 308,750 in total If the company's cost per unit of finished goods using variable costing is $2,375, what is total variable overhead?

(Multiple Choice)

4.9/5

(30)

Question 6

To convert variable costing net income to absorption costing net income, the fixed production cost in ending inventory and ___ the fixed production cost in beginning inventory.

(Short Answer)

4.9/5

(36)

Question 7

It is not possible to convert reports prepared using variable costing to absorption costing reports.

(True/False)

4.8/5

(34)

Question 8

Under absorption costing, a company had the following unit costs when 8,000 units were produced. Direct labor \ 8.50 per unit Direct material \ 9.00 per unit Variable overhead \ 6.75 per unit Fixed overhead (\ 60,000/8,000 units ) Total production cost Compute the total production cost per unit under variable costing if 20,000 units had been produced.

(Multiple Choice)

4.8/5

(33)

Question 9

Given the following data, total product cost per unit under absorption costing is $9.14. Direct labor Direct rmaterials Overhead Total variable overhead \ 202,500 Total fixed overhead \ 140,400 Expected urits to be produced 45,000 units

(True/False)

4.7/5

(36)

Question 10

The bottom line of a contribution margin report is net income.

(True/False)

4.9/5

(34)

Question 11

The biggest problems with producing too much are lost sales and customer dissatisfaction.

(True/False)

4.9/5

(33)

Question 12

Wind Fall, a manufacturer of leaf blowers, began operations this year.During this year, the company produced 10,000 leaf blowers and sold 8,500.At year-end the company reported the following income statement using absorption costing: Sales (8,500\times\ 45) \ 382,500 Cost of goods sold (8,500\times\ 20) Gross margin \ 212,500 Selling and administrative expenses Net income Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced).Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

(Multiple Choice)

4.8/5

(39)

Question 13

Red and White Company reported the following monthly data: Units produced 2,000 units Sales price \ 25 per unit Direct materials \ 1 per unit Direct labor \ 2 per unit Variable overhead \ 3 per unit Fixed overhead \ 8,000 in total -What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?

(Multiple Choice)

4.9/5

(34)

Question 14

________________________ is a costing method that includes all manufacturing costs in unit product costs.

(Short Answer)

4.9/5

(38)

Question 15

Dataport Company reports the following annual cost data for its single product: Normal production and saleslevel 89,000 units Direct materials \ 14.00 per unit Direct labor \ 21.00 per unit Variable overhead \ 27.00 per unit Fixed overhead \ 3,738,000 in total This product is normally sold for $230 per unit.If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

(Essay)

4.9/5

(38)

Question 16

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing. Direct labor \ 2 per unit Direct materials \ 8 per unit Overhead Total variable overhead \ 37,500 Total fixed overhead \ 249,000 Expected urits to be produced 15,000 units

(True/False)

4.9/5

(41)

Question 17

Cost information from both absorption costing and variable costing can aid managers in pricing.

(True/False)

4.9/5

(38)

Question 18

The traditional income statement format used for financial reporting is called the contribution margin format.

(True/False)

4.8/5

(35)

Question 19

Sea Company reports the following information regarding its production cost. Units produced 42,000 units Direct labor \ 35 per unit Direct materials \ 28 per unit Variable overhead \ 17 per unit Fixed overhead \ 105,000 in total Compute production cost per unit under variable costing.

(Multiple Choice)

4.9/5

(33)

Question 20

How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences. (a)Units produced equal units sold (b)Units produced exceed units sold (c)Units produced are less than units sold

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units, respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

Shore Company reports the following information regarding its production cost: Units produced 28,000 units Direct labor \ 23 per unit Direct materials \ 24 per unit Variable overhead \ 280,000 per unit Fixed overhead \ 94,920 in total Compute production cost per unit under variable costing.

The use of absorption costing can result in misleading product cost information.

To convert variable costing net income to absorption costing net income, the fixed production cost in ending inventory and ___ the fixed production cost in beginning inventory.

It is not possible to convert reports prepared using variable costing to absorption costing reports.

Given the following data, total product cost per unit under absorption costing is $9.14. Direct labor Direct rmaterials Overhead Total variable overhead \ 202,500 Total fixed overhead \ 140,400 Expected urits to be produced 45,000 units

The bottom line of a contribution margin report is net income.

The biggest problems with producing too much are lost sales and customer dissatisfaction.

________________________ is a costing method that includes all manufacturing costs in unit product costs.

Cost information from both absorption costing and variable costing can aid managers in pricing.

The traditional income statement format used for financial reporting is called the contribution margin format.

Sea Company reports the following information regarding its production cost. Units produced 42,000 units Direct labor \ 35 per unit Direct materials \ 28 per unit Variable overhead \ 17 per unit Fixed overhead \ 105,000 in total Compute production cost per unit under variable costing.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Time Value of Money

Basic Accounting for Transactions

Accounting for Partnerships

Filters

Exam 6: Variable Costing and Performance Reporting

How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences. (a)Units produced equal units sold (b)Units produced exceed units sold (c)Units produced are less than units sold

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units, respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

Shore Company reports the following information regarding its production cost: Units produced 28,000 units Direct labor \ 23 per unit Direct materials \ 24 per unit Variable overhead \ 280,000 per unit Fixed overhead \ 94,920 in total Compute production cost per unit under variable costing.

The use of absorption costing can result in misleading product cost information.

To convert variable costing net income to absorption costing net income, ____________________ the fixed production cost in ending inventory and _______________________ the fixed production cost in beginning inventory.

It is not possible to convert reports prepared using variable costing to absorption costing reports.

Given the following data, total product cost per unit under absorption costing is $9.14. Direct labor Direct rmaterials Overhead Total variable overhead \ 202,500 Total fixed overhead \ 140,400 Expected urits to be produced 45,000 units

The bottom line of a contribution margin report is net income.

The biggest problems with producing too much are lost sales and customer dissatisfaction.

________________________ is a costing method that includes all manufacturing costs in unit product costs.

Cost information from both absorption costing and variable costing can aid managers in pricing.

The traditional income statement format used for financial reporting is called the contribution margin format.

Sea Company reports the following information regarding its production cost. Units produced 42,000 units Direct labor \ 35 per unit Direct materials \ 28 per unit Variable overhead \ 17 per unit Fixed overhead \ 105,000 in total Compute production cost per unit under variable costing.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Time Value of Money

Basic Accounting for Transactions

Accounting for Partnerships

Filters

To convert variable costing net income to absorption costing net income, the fixed production cost in ending inventory and ___ the fixed production cost in beginning inventory.