Question 1

Managers should accept special orders provided the special order price exceeds the product cost per unit under absorption costing.

Accepted Answer

A) True 
 B)False  False

Question 2

________ and ________ are product costs that can be directly traced to the product.

Accepted Answer

Direct labor; direct materials (either order)

Question 3

Which of the following would be reported on a variable costing income statement?

Accepted Answer

A) Gross margin 
B) Cost of goods available for sale 
C) Total cost of goods sold 
D) Contribution margin 
E) Work-in-process inventory 
A) Gross margin 
B) Cost of goods available for sale 
C) Total cost of goods sold 
D) Contribution margin 
E) Work-in-process inventory D

Question 4

A company reports the following information for its first year of operations:  If the company's cost per unit of finished goods using variable costing is $2,375,what is total variable overhead?

Accepted Answer

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

Question 5

Which of the following statements is true regarding variable costing?

Accepted Answer

A) It is a traditional costing approach. 
B) Only manufacturing costs that change in total with changes in production level are included in product costs. 
C) It is not permitted to be used for managerial reporting. 
D) It treats overhead in the same manner as absorption costing. 
E) It makes it easier to manipulate earnings with changes in production levels. 
A) It is a traditional costing approach. 
B) Only manufacturing costs that change in total with changes in production level are included in product costs. 
C) It is not permitted to be used for managerial reporting. 
D) It treats overhead in the same manner as absorption costing. 
E) It makes it easier to manipulate earnings with changes in production levels.

Question 6

When units produced are less than units sold,income under absorption costing is higher than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 7

What is the benefit of using variable costing in short-term pricing decisions? Is this benefit available under absorption costing?

Accepted Answer

In short-term pricing decisions,allocate

Question 8

Dataport Company reports the following annual cost data for its single product:
   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 increase current production.

Accepted Answer

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

Question 9

Assuming fixed costs remain constant,and a company produces more units than it sells,then income under absorption costing is less than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

With excess capacity,increases in produc

Question 11

Home Base,Inc.reports the following production cost information:
   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.

Accepted Answer

a.$17 DL + $34 DM + $26 VOH = $77 per un

Question 12

Cavalier Corporation sold 26,000 units of its product at a price of $225 per unit.Total variable cost per unit is $188,consisting of $103 in variable production cost and $85 in variable selling and administrative cost.Compute the manufacturing margin for the company under variable costing.

Accepted Answer

($225 - $1

Question 13

Castaway Company reports the following first year production cost information:
   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.

Accepted Answer

a.$8 DL + $4 DM + $41 VOH = $53 per unit

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Given the Scavenger Company data,what is net income using absorption costing?

Accepted Answer

A) $201,250 
B) $181,250 
C) $150,000 
D) $177,600 
E) $276,250 
A) $201,250 
B) $181,250 
C) $150,000 
D) $177,600 
E) $276,250

Question 16

A per unit cost that is constant at all production levels is a ________ cost per unit.

Accepted Answer

The answer of A per unit cost that is constant...

Question 17

What are the limitations of using variable costing?

Accepted Answer

Variable costing is

Question 18

Given the following data,total product cost per unit under absorption costing is $11.40.

Accepted Answer

A) True 
 B)False

Question 19

Assuming fixed costs remain constant,and a company produces and sells the same number of units,then income under absorption costing is less than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 20

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:  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.

Accepted Answer

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

Exam 19: Variable Costing and Analysis

Managers should accept special orders provided the special order price exceeds the product cost per unit under absorption costing.

________ and ________ are product costs that can be directly traced to the product.

Which of the following would be reported on a variable costing income statement?

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using variable costing is $2,375,what is total variable overhead?

Which of the following statements is true regarding variable costing?

When units produced are less than units sold,income under absorption costing is higher than income under variable costing.

What is the benefit of using variable costing in short-term pricing decisions? Is this benefit available under absorption costing?

Assuming fixed costs remain constant,and a company produces more units than it sells,then income under absorption costing is less than income under variable costing.

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

Cavalier Corporation sold 26,000 units of its product at a price of $225 per unit.Total variable cost per unit is $188,consisting of $103 in variable production cost and $85 in variable selling and administrative cost.Compute the manufacturing margin for the company under variable costing.

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

Given the Scavenger Company data,what is net income using absorption costing?

A per unit cost that is constant at all production levels is a ________ cost per unit.

What are the limitations of using variable costing?

Given the following data,total product cost per unit under absorption costing is $11.40.

Assuming fixed costs remain constant,and a company produces and sells the same number of units,then income under absorption costing is less than income under variable costing.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

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 Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

and are product costs that can be directly traced to the product.