Question 1

Under a traditional income statement format expenses are grouped according to cost behavior.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a product cost?

Accepted Answer

A) Direct labor. 
B) Indirect manufacturing costs. 
C) Direct materials. 
D) Manufacturing overhead. 
E) Advertising costs. 
A) Direct labor. 
B) Indirect manufacturing costs. 
C) Direct materials. 
D) Manufacturing overhead. 
E) Advertising costs.

Question 3

Fomtech, Inc.had net income of $750,000 based on variable costing.Beginning and ending inventories were 50,000 units and 48,000 units, respectively.Assume the fixed overhead per unit was $.75 for both the beginning and ending inventory.What is net income under absorption costing?

Accepted Answer

A) $751,500 
B) $676,500 
C) $823,500 
D) $748,500 
E) $750,000 
A) $751,500 
B) $676,500 
C) $823,500 
D) $748,500 
E) $750,000

Question 4

Branwin Corporation sold 7,200 units of its product at a price of $35.60 per unit.Total variable cost per unit is $17.55, consisting of $10.50 in variable production cost and $7.05 in variable selling and administrative cost.Compute contribution margin for the company.

Accepted Answer

A) $256,320 
B) $126,360 
C) $50,760 
D) $129,960 
E) $180,720 
A) $256,320 
B) $126,360 
C) $50,760 
D) $129,960 
E) $180,720

Question 5

Dent Corporation had net income of $182,000 based on variable costing.Beginning and ending inventories were 5,000 units and 8,000 units, respectively.Assume the fixed overhead per unit was $3 for both the beginning and ending inventory.What is net income under absorption costing?

Accepted Answer

A) $173,000 
B) $221,000 
C) $191,000 
D) $143,000 
E) $185,000 
A) $173,000 
B) $221,000 
C) $191,000 
D) $143,000 
E) $185,000

Question 6

A company is currently operating at 60% capacity producing 10,000 units.Cost information relating to this current production is shown in the following table:
 $$\begin{array} { | l | r | } 
\hline & \text { Per Urit } \
\hline \text { Sales price } & \$ 21 \
\hline \text { Direct rraterial } & \$ 6 \
\hline \text { Direct labor } & \$ 4.12 \
\hline \begin{array} { l } 
\text { Variable } \
\text { overhead }
\end{array} & \$ 2.23 \
\hline \text { Fixed overhead } & \$ 0.80 \
\hline
\end{array}$$ The company has been approached by a customer with a request for a special order for 5,000 units.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

Accepted Answer

10,000/.6 - 10,000 = 6,666 uni

Question 7

A company normally sells a product for $20 per unit.Variable per unit costs for this product are: $2 direct materials, $4 direct labor, and $1.50 variable overhead.The company is currently operating at 70% of capacity producing 14,000 units per year.Total fixed costs are $42,000 per year.The company should not accept a special order for 2,000 units which would be sold for $10 per unit because there would be an incremental loss on the order.

Accepted Answer

A) True 
 B)False

Question 8

Blackbird, Incorporated reports the following information regarding its production cost:
 $\begin{array}{ll}
\text { Units produced } & 39,000 \text { units } \
\text { Direct labor } & \$ 13 \text { per unit } \
\text { Direct materials } & \$ 17 \text { per unit } \
\text { Variable overhead } & \$ 7,800,000 \text { in total } \
\text { Fixed overhead } & \$ 9,750 ,000 \text { in total }
\end{array}$ a.Compute production cost per unit under variable costing.
b.Compute production cost per unit under absorption costing.

Accepted Answer

a.$13 DL + $17 DM + ($7,800,00

Question 9

Contribution margin is the excess of sales over total variable costs.

Accepted Answer

A) True 
 B)False

Question 10

Magenta Inc.reports the following information for the current year which is its first year of operations: $\begin{array}{ll}
\text { Units produced this year } & 750,000 \text { units } \
\text { Units sold this year } & 740,000 \text { units } \
\text { Direct materials } & \$ 18.30 \text { per unit } \
\text { Direct labor } & \$ 14.20 \text { per unit } \
\text { Variable overhead } & ? \text { in total } \
\text { Fixed overhead } & \$ 4,500,000 \text { in total }
\end{array}$ If the company's cost per unit of finished goods using absorption costing is $39.75, what is total variable overhead?

Accepted Answer

A) $925,000 
B) $877,500 
C) $937,500. 
D) $865,800 
E) $5,437,500 
A) $925,000 
B) $877,500 
C) $937,500. 
D) $865,800 
E) $5,437,500

Question 11

Multiplying the contribution margin ratio by the expected change in sales equals the expected change in contribution margin.

Accepted Answer

A) True 
 B)False

Question 12

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

Accepted Answer

Under absorption costing, both variable

Question 13

What is a contribution margin report?

Accepted Answer

A contribution margin report presents co

Question 14

Digby Company manufactured and sold 37,000 units of its product at a price of $93 per unit.Total variable cost per unit is $60, consisting of $58 in variable production cost and $2 in variable selling and administrative cost.Fixed costs of manufacturing are $350,000.
a.Compute the manufacturing margin for the company under variable costing.
b.Compute the contribution margin based on this data.
c.Compute the gross margin under absorption costing.

Accepted Answer

a.($93 - $58)x 37,000 units =

Question 15

Stonehenge Inc., a manufacturer of landscaping blocks, began operations on April 1 of the current year.During this time, the company produced 750,000 units and sold 720,000 units at a sales price of $9 per unit.Cost information for this period is shown in the following table:
 $\begin{array}{ll}
\text { Production costs }\
\quad\text { Direct materials } & \$ 1.80 \text { per unit } \
\quad\text { Direct labor } & \$ 30 \text { per unit } \
\quad\text { Variable overhead } & \$ 495,000 \text { in tota } \
\quad\text { Fixed overhead } & \$ 450.000 \text { in tota }\
\text { Nonproduction costs }\
\quad\text {Variable selling and administrative }& \$ 18,000 \text {in total}\
\quad\text {Fixed selling and administrative }& \$ 53,000 \text { in total}\
\end{array}$ a.Prepare Stonehenge's December 31 income statement for the current year under absorption costing.
b.Prepare Stonehenge's December 31 income statement for the current year under variable costing.

Accepted Answer

None

Question 16

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 the Red and White's contribution margin for this month if 980 units were sold?

Accepted Answer

A) $38,000 
B) $18,620 
C) $24,500 
D) $50,000 
E) $21,560 
A) $38,000 
B) $18,620 
C) $24,500 
D) $50,000 
E) $21,560

Question 17

If a company has excess capacity, increases in production level will increase variable production costs but not fixed production costs.

Accepted Answer

A) True 
 B)False

Question 18

During a given year, if a company sells more units than it produces, then ending inventory units will be less than beginning inventory units.

Accepted Answer

A) True 
 B)False

Question 19

Given the following data, total product cost per unit under variable costing is $10.75.
 $$\begin{array} { | l | c | } 
\hline \text { Direct labor } & \$ 7 \text { per unit } \
\hline \text { Direct rmaterials } & \$ 1 \text { per unit } \
\hline \text { Overhead } & \
\hline \text { Total variable overhead } & \$ 20,000 \
\hline \text { Total fixed overhead } & \$ 90,000 \
\hline & \
\hline \text { Expected urits to be produced } & 40,000 \text { units } \
\hline
\end{array}$$

Accepted Answer

A) True 
 B)False

Question 20

How can the use of absorption costing result in overproduction?

Accepted Answer

Absorption costing treats fixed manufact

Under a traditional income statement format expenses are grouped according to cost behavior.

Which of the following is not a product cost?

Fomtech, Inc.had net income of $750,000 based on variable costing.Beginning and ending inventories were 50,000 units and 48,000 units, respectively.Assume the fixed overhead per unit was $.75 for both the beginning and ending inventory.What is net income under absorption costing?

Branwin Corporation sold 7,200 units of its product at a price of $35.60 per unit.Total variable cost per unit is $17.55, consisting of $10.50 in variable production cost and $7.05 in variable selling and administrative cost.Compute contribution margin for the company.

Dent Corporation had net income of $182,000 based on variable costing.Beginning and ending inventories were 5,000 units and 8,000 units, respectively.Assume the fixed overhead per unit was $3 for both the beginning and ending inventory.What is net income under absorption costing?

Contribution margin is the excess of sales over total variable costs.

Multiplying the contribution margin ratio by the expected change in sales equals the expected change in contribution margin.

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

What is a contribution margin report?

If a company has excess capacity, increases in production level will increase variable production costs but not fixed production costs.

During a given year, if a company sells more units than it produces, then ending inventory units will be less than beginning inventory units.

Given the following data, total product cost per unit under variable costing is $10.75. Direct labor \ 7 per unit Direct rmaterials \ 1 per unit Overhead Total variable overhead \ 20,000 Total fixed overhead \ 90,000 Expected urits to be produced 40,000 units

How can the use of absorption costing result in overproduction?

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

Under a traditional income statement format expenses are grouped according to cost behavior.

Which of the following is not a product cost?

Fomtech, Inc.had net income of $750,000 based on variable costing.Beginning and ending inventories were 50,000 units and 48,000 units, respectively.Assume the fixed overhead per unit was $.75 for both the beginning and ending inventory.What is net income under absorption costing?

Branwin Corporation sold 7,200 units of its product at a price of $35.60 per unit.Total variable cost per unit is $17.55, consisting of $10.50 in variable production cost and $7.05 in variable selling and administrative cost.Compute contribution margin for the company.

Dent Corporation had net income of $182,000 based on variable costing.Beginning and ending inventories were 5,000 units and 8,000 units, respectively.Assume the fixed overhead per unit was $3 for both the beginning and ending inventory.What is net income under absorption costing?

Contribution margin is the excess of sales over total variable costs.

Multiplying the contribution margin ratio by the expected change in sales equals the expected change in contribution margin.

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

What is a contribution margin report?

If a company has excess capacity, increases in production level will increase variable production costs but not fixed production costs.

During a given year, if a company sells more units than it produces, then ending inventory units will be less than beginning inventory units.

Given the following data, total product cost per unit under variable costing is $10.75. Direct labor \ 7 per unit Direct rmaterials \ 1 per unit Overhead Total variable overhead \ 20,000 Total fixed overhead \ 90,000 Expected urits to be produced 40,000 units

How can the use of absorption costing result in overproduction?

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