Question 1

Variable costing is used for external reporting purposes,and absorption costing is used for internal decision-making purposes.

Accepted Answer

A) True 
 B)False  False

Question 2

In variable costing,fixed manufacturing overhead is considered a period cost because ________.

Accepted Answer

A) these costs are indirectly related to production 
B) these are not incurred in the period in which the units are produced 
C) these costs are incurred whether or not the company manufactures any goods 
D) these costs are direct costs incurred for production 
A) these costs are indirectly related to production 
B) these are not incurred in the period in which the units are produced 
C) these costs are incurred whether or not the company manufactures any goods 
D) these costs are direct costs incurred for production C

Question 3

When there are no beginning or ending finished goods inventories,________.

Accepted Answer

A) variable and absorption costing will result in different values for ending finished goods inventories 
B) variable and absorption costing will result in the same operating profits 
C) variable and absorption costing will result in different sales revenue 
D) variable and absorption costing will result in different values for cost of goods sold 
A) variable and absorption costing will result in different values for ending finished goods inventories 
B) variable and absorption costing will result in the same operating profits 
C) variable and absorption costing will result in different sales revenue 
D) variable and absorption costing will result in different values for cost of goods sold B

Question 4

Home-Plus Inc.has two business segments-Commercial and Residential.The following data has been provided for the year 2014.
   The company incurred $1,500 as fixed costs.
Requirements:
a)Prepare the income statement of Home-Plus showing the contribution margin of each segment.
b)Calculate the contribution margin ratio of each segment.Which segment is more profitable and why?

Accepted Answer

@#IMG-DLM& b)Contribution margin ratio is contribu

Question 5

Nice Aqua Inc.has provided the following information for the year 2013.  
- What is the unit product cost using variable costing?

Accepted Answer

A) $135 
B) $100 
C) $105 
D) $165 
A) $135 
B) $100 
C) $105 
D) $165

Question 6

Service companies do not have fixed costs; all costs incurred by service companies are variable costs.

Accepted Answer

A) True 
 B)False

Question 7

Petro Fertilizers Company sells two products,Quo-Eco and Quo-Pre,with a sales mix of 65% and 35%,respectively.Quo-Eco has a contribution margin per unit of $10,and Quo-Pre has a contribution margin per unit of $15.The company sold 1,000 total units in March.
Requirements:
a)Calculate the total contribution margin for the company.
b)Assume the sales mix shifted to 50% for each product,and calculate the total contribution margin for the company.

Accepted Answer

a)
 @#IMG-DLM& Contribution margin
 @#IMG-DLM& Tot

Question 8

Contribution margin is calculated by deducting ________ from sales revenue.

Accepted Answer

A) total product costs 
B) total selling and administrative costs 
C) total fixed costs 
D) total variable costs 
A) total product costs 
B) total selling and administrative costs 
C) total fixed costs 
D) total variable costs

Question 9

Paradiso Company manufactures dolls that are sold to various distributors.The company produces at full capacity for six months each year to meet peak demand; the manufacturing facility operates at 80% of capacity for the other six months of the year.The company has provided the following data for the year:   Paradiso receives an offer to produce 5,000 dolls for a special event.This is a one-time opportunity during a period when the company has excess capacity.What is the minimum selling price the company should accept for the order?

Accepted Answer

A) $12 
B) $30 
C) $15 
D) $18 
A) $12 
B) $30 
C) $15 
D) $18

Question 10

Isphase Inc.has provided the following financial data for 2014:
   There are no beginning inventories.Prepare an income statement for the year using the traditional format.

Accepted Answer

The answer of Isphase Inc.has provided the following financial data...

Question 11

The contribution margin for service companies is calculated by subtracting fixed costs from service revenue.

Accepted Answer

A) True 
 B)False

Question 12

The traditional income statement format is prepared under absorption costing.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is true of absorption costing?

Accepted Answer

A) It considers variable selling and administrative costs as product costs. 
B) It considers fixed selling and administrative costs as product costs. 
C) It considers fixed manufacturing overhead cost as product costs. 
D) It considers variable manufacturing overhead cost as period costs. 
A) It considers variable selling and administrative costs as product costs. 
B) It considers fixed selling and administrative costs as product costs. 
C) It considers fixed manufacturing overhead cost as product costs. 
D) It considers variable manufacturing overhead cost as period costs.

Question 14

Variable costing is more appropriate than absorption costing when the decision ________.

Accepted Answer

A) relates to production planning within the capacity limits in the short run 
B) involves reducing fixed costs that are controllable by the upper management 
C) does not involve analysis of profitability based on sales mix 
D) does not involve analysis of contribution margin 
A) relates to production planning within the capacity limits in the short run 
B) involves reducing fixed costs that are controllable by the upper management 
C) does not involve analysis of profitability based on sales mix 
D) does not involve analysis of contribution margin

Question 15

Variable costing considers direct materials,direct labor,variable manufacturing overhead,and fixed manufacturing overhead as product costs.

Accepted Answer

A) True 
 B)False

Question 16

A variable costing income statement is used for ________.

Accepted Answer

A) filing income tax returns 
B) external reporting purposes 
C) determining the amount of gross profit 
D) internal decision making purposes 
A) filing income tax returns 
B) external reporting purposes 
C) determining the amount of gross profit 
D) internal decision making purposes

Question 17

The fixed manufacturing overhead is considered a product cost in variable costing and a period cost in absorption costing.

Accepted Answer

A) True 
 B)False

Question 18

Period costs under the variable costing method include ________.

Accepted Answer

A) variable manufacturing overhead 
B) variable selling and administrative costs 
C) direct materials 
D) direct labor 
A) variable manufacturing overhead 
B) variable selling and administrative costs 
C) direct materials 
D) direct labor

Question 19

Jupiter Inc.reports the following information for August:   Calculate the operating income for August using variable costing.

Accepted Answer

A) $625,000 
B) $450,000 
C) $525,000 
D) $420,000 
A) $625,000 
B) $450,000 
C) $525,000 
D) $420,000

Question 20

Fred Condiments Company manufactures jam and ketchup.Price and cost data for the both the products follow:
     Calculate the total contribution margin and the contribution margin ratio for each sales representative.Round of to two decimal places.

Accepted Answer

@#IMG-DLM& Sale Revenue
 @#IMG-DLM& Vari

Exam 21: Variable Costing

Variable costing is used for external reporting purposes,and absorption costing is used for internal decision-making purposes.

In variable costing,fixed manufacturing overhead is considered a period cost because ________.

When there are no beginning or ending finished goods inventories,________.

Nice Aqua Inc.has provided the following information for the year 2013. - What is the unit product cost using variable costing?

Service companies do not have fixed costs; all costs incurred by service companies are variable costs.

Contribution margin is calculated by deducting ________ from sales revenue.

Isphase Inc.has provided the following financial data for 2014: There are no beginning inventories.Prepare an income statement for the year using the traditional format.

The contribution margin for service companies is calculated by subtracting fixed costs from service revenue.

The traditional income statement format is prepared under absorption costing.

Which of the following statements is true of absorption costing?

Variable costing is more appropriate than absorption costing when the decision ________.

Variable costing considers direct materials,direct labor,variable manufacturing overhead,and fixed manufacturing overhead as product costs.

A variable costing income statement is used for ________.

The fixed manufacturing overhead is considered a product cost in variable costing and a period cost in absorption costing.

Period costs under the variable costing method include ________.

Jupiter Inc.reports the following information for August: Calculate the operating income for August using variable costing.

Fred Condiments Company manufactures jam and ketchup.Price and cost data for the both the products follow: Calculate the total contribution margin and the contribution margin ratio for each sales representative.Round of to two decimal places.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Accounting Information Systems

Filters