Question 1

Special order decisions should be made using variable costing because:

Accepted Answer

A) Special order decisions usually focus on fixed costs 
B) Variable costing includes all overhead costs in the calculation of product costs. 
C) Only variable costs will increase as a result of the special order. 
D) All costs,including variable and fixed costs,must be covered by the special order pricing. 
E) Fixed overhead costs will change as a result of the special order. 
A) Special order decisions usually focus on fixed costs 
B) Variable costing includes all overhead costs in the calculation of product costs. 
C) Only variable costs will increase as a result of the special order. 
D) All costs,including variable and fixed costs,must be covered by the special order pricing. 
E) Fixed overhead costs will change as a result of the special order.

Question 2

When the number of units produced is equal to the number of units sold,net income reported under variable costing is identical to net income reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 3

Given the following data,calculate the total product cost per unit under absorption costing.

Accepted Answer

A) $4.75 per unit 
B) $7.05 per unit 
C) $13.08 per unit 
D) $15.38 per unit 
E) $16 per unit 
A) $4.75 per unit 
B) $7.05 per unit 
C) $13.08 per unit 
D) $15.38 per unit 
E) $16 per unit

Question 4

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

Accepted Answer

A) True 
 B)False

Question 5

________ costing treats fixed overhead as a period cost.

Accepted Answer

The answer of ________ costing treats fixed overhead as a...

Question 6

Swola Company reports the following annual cost data for its single product.   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 income increase or decrease under absorption costing?

Accepted Answer

A) $187,500 increase. 
B) $112,500 increase. 
C) There will be no change in income. 
D) $112,500 decrease. 
E) $187,500 decrease. 
A) $187,500 increase. 
B) $112,500 increase. 
C) There will be no change in income. 
D) $112,500 decrease. 
E) $187,500 decrease.

Question 7

What is a contribution margin report?

Accepted Answer

A contribution margin report presents co

Question 8

Under variable costing,fixed manufacturing overhead is expensed at the time the units are produced.Under absorption costing,fixed manufacturing overhead is expensed at the time the units are sold.

Accepted Answer

A) True 
 B)False

Question 9

Geneva Co.reports the following information for July:  Calculate the contribution margin for July.

Accepted Answer

A) $525,000 
B) $425,000 
C) $650,000 
D) $750,000 
A) $525,000 
B) $425,000 
C) $650,000 
D) $750,000

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

32 Degrees,Inc.,a manufacturer of frozen food,began operations on July 1 of the current year.During this time,the company produced 140,000 units and sold 140,000 units at a sales price of $125 per unit.Cost information for this period is shown in the following table:
   a.Prepare 32 Degree's December 31st income statement for the current year under absorption costing.
b.Prepare 32 Degree's December 31st income statement for the current year under variable costing.

Accepted Answer

The answer of 32 Degrees,Inc.,a manufacturer of frozen food,began operations...

Question 12

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Accepted Answer

A) True 
 B)False

Question 13

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:
   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?

Accepted Answer

8,000/.7 - 8,000 = 3,428 unit

Question 14

Gage 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 $63,what is total variable overhead?

Accepted Answer

A) $21,000 
B) $71,500 
C) $77,000 
D) $19,500 
E) $16,590 
A) $21,000 
B) $71,500 
C) $77,000 
D) $19,500 
E) $16,590

Question 15

Brush Industries reports the following information for May:  Calculate the gross margin for May under absorption costing.

Accepted Answer

A) $650,000 
B) $325,000 
C) $525,000 
D) $550,000 
E) $575,000 
A) $650,000 
B) $325,000 
C) $525,000 
D) $550,000 
E) $575,000

Question 16

Given the Galaxy,Inc.data,what is net income using absorption costing?

Accepted Answer

A) $11,275,000 
B) $17,400,000 
C) $16,360,000 
D) $16,800,000 
E) $16,220,000 
A) $11,275,000 
B) $17,400,000 
C) $16,360,000 
D) $16,800,000 
E) $16,220,000

Question 17

Which of the following is not a product cost under variable costing?

Accepted Answer

A) Direct materials. 
B) Fixed manufacturing overhead. 
C) Direct labor. 
D) Variable manufacturing overhead. 
E) All variable manufacturing costs. 
A) Direct materials. 
B) Fixed manufacturing overhead. 
C) Direct labor. 
D) Variable manufacturing overhead. 
E) All variable manufacturing costs.

Question 18

Geneva Company manufactures dolls that are sold to various customers.The company works at full capacity for half the year to meet peak demand,and operates at 80% capacity for the other half of the year.The following information is provided:   Geneva receives a purchase order to make 5,000 dolls as a one-time event.The good news is that this order is during a period when Geneva does have sufficient excess capacity.What is the lowest selling price Geneva should accept for this purchase order?

Accepted Answer

A) $35.00 
B) $26.00 
C) $29.50 
D) $23.50 
E) $25.00 
A) $35.00 
B) $26.00 
C) $29.50 
D) $23.50 
E) $25.00

Question 19

Tim's Tools,a manufacturer of cordless drills,began operations this year.During this year,the company produced 20,000 units and sold 18,000 units.At year-end,the company reported the following income statement using absorption costing:   Production costs per unit total $14,which consists of $12.90 in variable production costs and $1.10 in fixed production costs (based on the 20,000 units produced).60% of total selling and administrative expenses are variable.Compute net income under variable costing.

Accepted Answer

A) $307,800 
B) $198,000 
C) $195,800 
D) $288,000 
E) $220,000 
A) $307,800 
B) $198,000 
C) $195,800 
D) $288,000 
E) $220,000

Question 20

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.

Accepted Answer

The answer of To convert variable costing net income to...

Exam 19: Variable Costing and Analysis

Special order decisions should be made using variable costing because:

When the number of units produced is equal to the number of units sold,net income reported under variable costing is identical to net income reported under absorption costing.

Given the following data,calculate the total product cost per unit under absorption costing.

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

________ costing treats fixed overhead as a period cost.

What is a contribution margin report?

Under variable costing,fixed manufacturing overhead is expensed at the time the units are produced.Under absorption costing,fixed manufacturing overhead is expensed at the time the units are sold.

Geneva Co.reports the following information for July: Calculate the contribution margin for July.

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

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Gage 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 $63,what is total variable overhead?

Brush Industries reports the following information for May: Calculate the gross margin for May under absorption costing.

Given the Galaxy,Inc.data,what is net income using absorption costing?

Which of the following is not a product cost under variable costing?

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.

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

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.