Question 1

The gross-margin format of the income statement:

Accepted Answer

A) distinguishes between manufacturing and nonmanufacturing costs 
B) distinguishes variable costs from fixed costs 
C) is used with variable costing 
D) calculates contribution margin 
A) distinguishes between manufacturing and nonmanufacturing costs 
B) distinguishes variable costs from fixed costs 
C) is used with variable costing 
D) calculates contribution margin A

Question 2

Normal capacity utilization is NOT the same as master-budget capacity utilization.

Accepted Answer

A) True 
 B)False  True

Question 3

Answer the following questions using the information below:
Goldfarb Company produces a specialty item. Management has provided the following information:
    
-Which of the following inventory costing methods shown below is LEAST likely to cause undesirable incentives for managers to build up finished goods inventory?

Accepted Answer

A) absorption costing 
B) variable costing 
C) throughput costing 
D) direct costing 
A) absorption costing 
B) variable costing 
C) throughput costing 
D) direct costing C

Question 4

Absorption costing:

Accepted Answer

A) expenses marketing costs as cost of goods sold 
B) treats direct manufacturing costs as a period cost 
C) includes fixed manufacturing overhead as an inventoriable cost 
D) is required for internal reports to managers 
A) expenses marketing costs as cost of goods sold 
B) treats direct manufacturing costs as a period cost 
C) includes fixed manufacturing overhead as an inventoriable cost 
D) is required for internal reports to managers

Question 5

The income under variable costing will always be the same as the income under absorption costing.

Accepted Answer

A) True 
 B)False

Question 6

Answer the following questions using the information below:
Gloria's Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced and 40,000 were sold. Other information for the year includes:
  
-What is the inventoriable cost per unit using absorption costing?

Accepted Answer

A) $32 
B) $35 
C) $60 
D) $80 
A) $32 
B) $35 
C) $60 
D) $80

Question 7

Which of the following cost(s)are inventoried when using variable costing?

Accepted Answer

A) direct manufacturing costs 
B) variable marketing costs 
C) fixed manufacturing costs 
D) Both A and B are correct. 
A) direct manufacturing costs 
B) variable marketing costs 
C) fixed manufacturing costs 
D) Both A and B are correct.

Question 8

Variable costing includes all variable costsboth manufacturing and nonmanufacturingin inventory.

Accepted Answer

A) True 
 B)False

Question 9

Ways to "produce for inventory" that result in increasing operating income include:

Accepted Answer

A) switching production to products that absorb the least amounts of fixed manufacturing costs 
B) delaying items that absorb the greatest amount of fixed manufacturing costs 
C) deferring maintenance to accelerate production 
D) All of these answers are correct. 
A) switching production to products that absorb the least amounts of fixed manufacturing costs 
B) delaying items that absorb the greatest amount of fixed manufacturing costs 
C) deferring maintenance to accelerate production 
D) All of these answers are correct.

Question 10

Throughput margin equals revenues minus all product costs.

Accepted Answer

A) True 
 B)False

Question 11

Throughput costing is also called:

Accepted Answer

A) absorption costing 
B) super-variable costing 
C) mixed costing 
D) direct costing 
A) absorption costing 
B) super-variable costing 
C) mixed costing 
D) direct costing

Question 12

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

Accepted Answer

A) practical capacity 
B) theoretical capacity 
C) master-budget capacity utilization 
D) normal capacity utilization 
A) practical capacity 
B) theoretical capacity 
C) master-budget capacity utilization 
D) normal capacity utilization

Question 13

Answer the following questions using the information below:
Veach Corporation incurred fixed manufacturing costs of $6,000 during 2011. Other information for 2011 includes:
   The company uses variable costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
-Fixed manufacturing costs included in ending inventory total:

Accepted Answer

A) $1,200 
B) $1,500 
C) $900 
D) 0 
A) $1,200 
B) $1,500 
C) $900 
D) 0

Question 14

Which of the following statements is FALSE?

Accepted Answer

A) Absorption costing allocates fixed manufacturing overhead to actual units produced during the period. 
B) Nonmanufacturing costs are expensed in the future under variable costing. 
C) Fixed manufacturing costs in ending inventory are expensed in the future under absorption costing. 
D) Operating income under absorption costing is higher than operating income under variable costing when production units exceed sales units. 
A) Absorption costing allocates fixed manufacturing overhead to actual units produced during the period. 
B) Nonmanufacturing costs are expensed in the future under variable costing. 
C) Fixed manufacturing costs in ending inventory are expensed in the future under absorption costing. 
D) Operating income under absorption costing is higher than operating income under variable costing when production units exceed sales units.

Question 15

________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect)are included as inventoriable costs and all fixed manufacturing costs are excluded.

Accepted Answer

A) Variable costing 
B) Mixed costing 
C) Absorption costing 
D) Standard costing 
A) Variable costing 
B) Mixed costing 
C) Absorption costing 
D) Standard costing

Question 16

Operating income using absorption costing will be ________ operating income if using variable costing.

Accepted Answer

A) $450 higher than 
B) $900 higher than 
C) $1,350 lower than 
D) the same as 
A) $450 higher than 
B) $900 higher than 
C) $1,350 lower than 
D) the same as

Question 17

Bressler Company sells its products for $33 each. The current production level is 50,000 units, although only 40,000 units are anticipated to be sold.
Unit manufacturing costs are:
   Required:
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.

Accepted Answer

a. Absorption-costing income statement:

Question 18

Operating income reported on the end-of-period financial statements is changed when ________ is (are)used to handle the production-volume variance at the end of the accounting period.

Accepted Answer

A) the adjusted allocation-rate approach 
B) the proration approach 
C) the write-off variances to cost of goods sold approach 
D) All of these answers are correct. 
A) the adjusted allocation-rate approach 
B) the proration approach 
C) the write-off variances to cost of goods sold approach 
D) All of these answers are correct.

Question 19

When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that:

Accepted Answer

A) sales decreased during the period 
B) variable cost per unit is more than fixed cost per unit 
C) there is a favorable production-volume variance 
D) absorption costing operating income exceeds variable costing operating income 
A) sales decreased during the period 
B) variable cost per unit is more than fixed cost per unit 
C) there is a favorable production-volume variance 
D) absorption costing operating income exceeds variable costing operating income

Question 20

Klein Enterprises produces a specialty statue item. The following information has been provided by management:
     Required:
a. What is the cost per statue if absorption costing is used?
b. What is the cost per statue if "super-variable costing" is used?
c. What is the total throughput contribution?

Accepted Answer

a. $9 + $5 + $4 = $1

The gross-margin format of the income statement:

Normal capacity utilization is NOT the same as master-budget capacity utilization.

Absorption costing:

The income under variable costing will always be the same as the income under absorption costing.

Answer the following questions using the information below: Gloria's Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced and 40,000 were sold. Other information for the year includes: -What is the inventoriable cost per unit using absorption costing?

Which of the following cost(s)are inventoried when using variable costing?

Variable costing includes all variable costsboth manufacturing and nonmanufacturingin inventory.

Ways to "produce for inventory" that result in increasing operating income include:

Throughput margin equals revenues minus all product costs.

Throughput costing is also called:

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

Which of the following statements is FALSE?

________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect)are included as inventoriable costs and all fixed manufacturing costs are excluded.

Operating income using absorption costing will be ________ operating income if using variable costing.

Operating income reported on the end-of-period financial statements is changed when ________ is (are)used to handle the production-volume variance at the end of the accounting period.

When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that:

Klein Enterprises produces a specialty statue item. The following information has been provided by management: Required: a. What is the cost per statue if absorption costing is used? b. What is the cost per statue if "super-variable costing" is used? c. What is the total throughput contribution?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 9: Inventory Costing and Capacity Analysis

The gross-margin format of the income statement:

Normal capacity utilization is NOT the same as master-budget capacity utilization.

Absorption costing:

The income under variable costing will always be the same as the income under absorption costing.

Answer the following questions using the information below: Gloria's Decorating produces and sells a mantel clock for $80 per unit. In 2011, 50,000 clocks were produced and 40,000 were sold. Other information for the year includes: -What is the inventoriable cost per unit using absorption costing?

Which of the following cost(s)are inventoried when using variable costing?

Variable costing includes all variable costsboth manufacturing and nonmanufacturingin inventory.

Ways to "produce for inventory" that result in increasing operating income include:

Throughput margin equals revenues minus all product costs.

Throughput costing is also called:

The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

Which of the following statements is FALSE?

________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect)are included as inventoriable costs and all fixed manufacturing costs are excluded.

Operating income using absorption costing will be ________ operating income if using variable costing.

Operating income reported on the end-of-period financial statements is changed when ________ is (are)used to handle the production-volume variance at the end of the accounting period.

When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that:

Klein Enterprises produces a specialty statue item. The following information has been provided by management: Required: a. What is the cost per statue if absorption costing is used? b. What is the cost per statue if "super-variable costing" is used? c. What is the total throughput contribution?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters