Exam 15: Topic Focus Variable and Absorption Costing

Walker’s Manufacturing began its operations on January 1 of the current year. Walker produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000. Under variable costing, what was Walker’s ending inventory on the balance sheet? A) $8,000 B) $28,000 C) $30,000 D) $30,400

You are assigned to a team responsible for reviewing the financial statements with lower-level departmental managers.Some of your team members want to use the absorption costing income statement generally distributed by the accounting department.You believe a variable costing income statement will be more appropriate to use in explaining items to lower-level managers.Your team has requested more information on the variable costing format. Required: Write a memo to your team members explaining why you believe the variable costing income statement should be used.

Fixed manufacturing overhead is treated as a period expense in which of the following costing methods?

Mixed costs must be divided into which of the following components?

The only difference between absorption costing and variable costing is the treatment of

To make predictions about costs and income,you must first separate costs by their behavior.

When the units produced equals the units sold

When production volume equals sales volume,fixed overhead expensed is higher using absorption costing than with variable costing.

Etters Manufacturing Company has provided the following financial data for its most recent month. Required: Prepare an income statement using an absorption costing format.

Mixed costs are divided into their direct and indirect components.

The matching principle states that