Exam 6: Variable Costing and Performance Reporting

What costs are treated as product costs under the absorption costing method?

Which of the following statements is true?

Product costs consist of direct labor, direct materials, and overhead.

Aces, Inc., a manufacturer of tennis rackets, began operations this year.The company produced 6,000 rackets and sold 4,900.At year-end, the company reported the following income statement using absorption costing. Sales (4,900\times\ 90) \ 441,000 Cost of goods sold (4,900\times\ 38) Gross margin \ 254,800 Selling and administrative expenses Net income Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced).Ten percent of total selling and administrative expenses are variable.Compute net income under variable costing.

Absorption costing is also called ________________________ costing.

Assume that the following information is available for Coldwrap, Inc.: Light- weight Down Comforter Medium- weight Down Comforter Heavy- weight Down Comforter Sales \ 525,000 \ 262,500 \ 660,000 Variable expenses Variable production \ 105,000 \ 28,875 \ 135,000 Variable advertising \ 15,750 \ 5,250 \ 33,000 Variable shipping \ 18,000 \ 21,000 \ 42,000 Compute contribution margin ratio for each product line.

Sales less variable costs equals manufacturing margin.

Clear Company reports the following information for its first year of operations: Units produced this year 50,000 units Units sold this year 49,000 units Direct materials \ 7 per unit Direct labor \ 3 per unit Variable overhead \ 210,000 in total Fixed overhead ? in total If the company's cost per unit of finished goods using absorption costing is $19.30, what is total fixed overhead?

Assume a company sells a given product for $75 per unit.How many units must be sold to break-even if variable selling costs are $12 per unit, variable production costs are $23 per unit, and total fixed costs are $700,000?

Home Base, Inc.reports the following production cost information: Units produced 97,000 units Units sold 92,000 units Direct labor \ 17 per unit Direct materials \ 34 per unit Variable overhead \ 2,522,000 in total Fixed overhead \ 1,940,000 in total a.Compute production cost per unit under variable costing. b.Compute production cost per unit under absorption costing. c.Determine the cost of ending inventory using variable costing. d.Determine the cost of ending inventory using absorption costing.

Product costs consist of direct labor, direct materials, and _________________.

Assume a company sells a given product for $83 per unit.Variable selling costs are $20.75 per unit and variable production costs are $49.80 per unit.If the company breaks even when selling 300,000 units, what are total fixed costs?

Wrap-It Company, a manufacturer of wrapping paper, began operations on June 1 of the current year.During this time, the company produced 370,000 units and sold 310,000 units at a sales price of $50 per unit.Cost information for this period is shown in the following table: Production costs Direct materials \ 2.00 per unit Direct labor \ 80 per unit Variable overhead \ 814,000 in total Fixed overhead \ 481,000 in total Jonproduction costs Variable selling and administrative \ 78,000 in total Fixed selling and administrative \ 210,000 in total a.Prepare Wrap-It's December 31^t income statement for the current year under absorption costing. b.Prepare Wrap-It's December 31 income statement for the current year under variable costing.

________________ is the amount remaining from sales revenues after cost of goods sold has been deducted.

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared using a contribution format.

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 in total Fixed overhead \ 94,920 in total Compute production cost per unit under absorption costing.

Swola Company reports the following annual cost data for its single product. Normal production level 75,000 units Direct materials \ 1.25 per unit Direct labor \ 2.50 per unit Variable overhead \ 3.75 per unit Fixed overhead \ 300,000 in total This product is normally sold for $25 per unit.If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's gross margin increase or decrease under variable costing?

Income under absorption costing will always be different than income under variable costing.

A company is currently operating at 70% capacity producing 8,000 units.Cost information relating to this current production is shown in the following table: Per Urit Sales price \ 15 Direct rraterial \ 3.20 Direct labor \ 7.10 Variable overhead \ 0.05 Fixed overhead \ 0.60 The company has been approached by a customer with a request for a special order for 1,500 units.The sales price per unit for this special order is $10.Should the company accept the special order?

A company reports the following information for its first year of operations: Units produced this year 43,000 units Units sold this year 39,000 units Direct materials \ 0.57 per unit Direct labor \ 0.83 per unit Variable overhead \ 26,660 in total Fixed overhead ? in total If the company's cost per unit of finished goods using variable costing is $2.02, what is the amount of total fixed overhead?