Exam 6: Variable Costing and Performance Reporting

_______________________ is the amount remaining from sales revenues after all variable production costs have been deducted.

Swisher, Incorporated reports the following annual cost data for its single product: Normal production level 30,000 units Direct materials \ 6.40 per unit Direct labor \ 3.93 per unit Variable overhead \ 5.80 per unit Fixed overhead \ 150,000 in total This product is normally sold for $48 per unit.If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing?

Castaway Company reports the following first year production cost information: Units produced 53,000 units Units sold 51,000 units Sales price \ 150 per unit Direct labor \ 8 per unit Direct materials \ 4 per unit Variable overhead \ 2,173,000 in total Fixed overhead \ 3,339,000 in tota Operating expenses \ 1,000,000 in total a.Determine the net income using variable costing. b.Determine the net income using absorption costing.

Assume a company sells a given product for $18 per unit.Variable selling costs are $0.70 per unit and variable production costs are $5.30 per unit.If the company breaks even when selling 4,000,000 units, what are total fixed costs?

Which of the following statements is true regarding absorption costing?

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 absorption costing if 30,000 units had been produced.

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 absorption costing?

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.

Countdown Inc.sold 17,000 units of its product at a price of $81 per unit.Total variable cost per unit is $72.09, consisting of $69.05 in variable production cost and $3.04 in variable selling and administrative cost.Compute the contribution margin for the company.

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared under absorption costing.

A company is currently operating at 80% capacity producing 5,000 units.Current cost information relating to this production is shown in the table below: Per Urit Sales price \ 34 Direct rraterial \ 2 Direct labor Variable overhead \ 4 Fixed overhead The company has been approached by a customer with a request for a 100-unit special order.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

Assume that the following information was available for Guy Brown Company.How would Maria Teresa Vazquez and the other owners evaluate this information based on contribution margin ratio? Recycled Toner Office Cartridges Supplies Furniture Sales \ 500,000 \ 100,000 \ 900,000 Variable expenses Variable production \ 50,000 \ 140,000 \ 270,000 Variable advertising \ 5,000 \ 14,000 \ 36,000 Variable shipping \ 10,000 \ 28,000 \ 72,000

Contribution margin ratio is the percent of each sales dollar used to cover variable costs.

What are the limitations of using variable costing?

When excess capacity exists, what is the minimum special order price a manager should accept to increase net income?

When units produced exceed the units sold, income under absorption costing is higher than income under variable costing.

Lukin Corporation reports the following first year production cost information: Units produced 62,000 units Units sold 59,000 units Sales price \ 350 per unit Direct labor \ 41 per unit Direct materials \ 15 per unit Variable overhead \ 9,300,000 in total Fixed overhead \ 4,340,000 in total Operating expenses \ 1,000,000 a.Compute production cost per unit under variable costing. b.Compute production cost per unit under absorption costing. c.Determine the net income using variable costing. d.Determine the net income using absorption costing.

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 variable costing if 980 units are sold and operating expenses are $12,000?

Pact Company had net income of $972,000 based on variable costing.Beginning and ending inventories were 7,800 units and 5,200 units, respectively.Assume the fixed overhead per unit was $3.61 for both the beginning and ending inventory.What is net income under absorption costing?