Question 1

If 800 units are produced and 1,200 units are sold, ________ results in the greatest amount of operating income.

Accepted Answer

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

Question 2

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

Accepted Answer

Throughput costing treats all costs exce

Question 3

Answer the following questions using the information below:
Stiller Corporation incurred fixed manufacturing costs of $12,000 during 2011. Other information for 2011 includes:
   The company uses absorption 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) $2,400 
B) $3,000 
C) $1,800 
D) 0 
A) $2,400 
B) $3,000 
C) $1,800 
D) 0

Question 4

Kaiser Company just hired its fourth production manager in three years. All three previous managers had quit because they could not get the company above the break-even point, even though sales had increased somewhat each year. The company was operating at about 60 % of plant capacity. The flatware industry was growing, so increased sales were not out of the question.
I. R. Thinking took the job as manager of the production division with a very attractive salary package. After interviewing for the position, he proposed a salary and bonus package that would give him a very small salary but a large bonus if he took the operating income (using absorption costing)above the breakeven point during his very first year.
Required:
What do you think Mr. Thinking had in mind for increasing the company's operating income?

Accepted Answer

Mr. Thinking realized that he could prob

Question 5

Explain three methods under absorption costing that managers can use to improve operating income.

Accepted Answer

1)A plant manager may switch to manufact

Question 6

When production quantity exceeds sales, throughput costing results in reporting lower operating income than variable costing.

Accepted Answer

A) True 
 B)False

Question 7

The downward demand spiral for a company is the continuing reduction in the demand for its products that occurs when competitor prices are NOT met.

Accepted Answer

A) True 
 B)False

Question 8

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 variable costing?

Accepted Answer

A) $32 
B) $35 
C) $40 
D) $60 
A) $32 
B) $35 
C) $40 
D) $60

Question 9

Explain the difference between the gross margin format and the contribution margin format for the income statement. What information is highlighted with each?

Accepted Answer

The gross margin format divides costs in

Question 10

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

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 11

Advocates of throughput costing maintain that:

Accepted Answer

A) both variable and fixed are necessary to produce goods; therefore, both types of costs should be inventoried 
B) all manufacturing costs plus some design costs should be inventoried 
C) fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units 
D) Both A and C are correct. 
A) both variable and fixed are necessary to produce goods; therefore, both types of costs should be inventoried 
B) all manufacturing costs plus some design costs should be inventoried 
C) fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units 
D) Both A and C are correct.

Question 12

From the perspective of long-run product costing it is best to use:

Accepted Answer

A) master-budget capacity utilization to highlight unused capacity 
B) normal capacity utilization for benchmarking purposes 
C) practical capacity for pricing decisions 
D) theoretical capacity for performance evaluation 
A) master-budget capacity utilization to highlight unused capacity 
B) normal capacity utilization for benchmarking purposes 
C) practical capacity for pricing decisions 
D) theoretical capacity for performance evaluation

Question 13

Companies have recently been able to reduce inventory levels because:

Accepted Answer

A) there is better sharing of information between suppliers and manufacturers 
B) just-in-time production strategies are being implemented 
C) production quotas are being implemented 
D) Both A and B are correct. 
A) there is better sharing of information between suppliers and manufacturers 
B) just-in-time production strategies are being implemented 
C) production quotas are being implemented 
D) Both A and B are correct.

Question 14

________ provides the lowest estimate of denominator-level capacity.

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 15

Ernsting Bottling Works manufactures glass bottles. January and February operations were identical in every way except for the planned production.
January had a production denominator of 35,000 units.
February had a production denominator of 36,000 units.
Fixed manufacturing costs totaled $126,000.
Sales for both months totaled 45,000 units with variable manufacturing costs of $4 per unit. Selling and administrative costs were $0.40 per unit variable and $60,000 fixed. The selling price was $10 per unit.
Required:
Compute the operating income for both months using absorption costing.

Accepted Answer

a. Theoretical capacity, practical capac

Question 16

Galliart Company has two identical divisions, East and West. Their sales, production volume, and fixed manufacturing costs have been the same for the last five years. The amounts for each division were as follows:
   East Division uses absorption costing and West Division uses variable costing.
Both use FIFO inventory methods.
Variable manufacturing costs are $5 per unit.
Selling and administrative expenses were identical for each division.
There were no inventories at the beginning of 20X1.
Which division reports the highest income each year? Explain.

Accepted Answer

East Division had the higher income duri

Question 17

The formula for computing the breakeven point in units under variable costing includes all of the following EXCEPT:

Accepted Answer

A) total fixed costs 
B) contribution margin percentage 
C) target operating income 
D) contribution margin per unit 
A) total fixed costs 
B) contribution margin percentage 
C) target operating income 
D) contribution margin per unit

Question 18

Theoretical capacity allows time for regular machine maintenance.

Accepted Answer

A) True 
 B)False

Question 19

Theoretical capacity:

Accepted Answer

A) represents real capacity available to the company 
B) provides the best perspective of actual long-run costs 
C) when used for product costing results in the lowest cost estimate of the four capacity options 
D) replicates the cost of capacity in a competitor's cost structure 
A) represents real capacity available to the company 
B) provides the best perspective of actual long-run costs 
C) when used for product costing results in the lowest cost estimate of the four capacity options 
D) replicates the cost of capacity in a competitor's cost structure

Question 20

In general, if inventory increases during an accounting period,

Accepted Answer

A) variable costing will report less operating income than absorption costing. 
B) absorption costing will report less operating income than variable costing. 
C) variable costing and absorption costing will report the same operating income. 
D) None of the above are correct. 
A) variable costing will report less operating income than absorption costing. 
B) absorption costing will report less operating income than variable costing. 
C) variable costing and absorption costing will report the same operating income. 
D) None of the above are correct.

If 800 units are produced and 1,200 units are sold, ________ results in the greatest amount of operating income.

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

Explain three methods under absorption costing that managers can use to improve operating income.

When production quantity exceeds sales, throughput costing results in reporting lower operating income than variable costing.

The downward demand spiral for a company is the continuing reduction in the demand for its products that occurs when competitor prices are NOT met.

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 variable costing?

Explain the difference between the gross margin format and the contribution margin format for the income statement. What information is highlighted with each?

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Advocates of throughput costing maintain that:

From the perspective of long-run product costing it is best to use:

Companies have recently been able to reduce inventory levels because:

________ provides the lowest estimate of denominator-level capacity.

The formula for computing the breakeven point in units under variable costing includes all of the following EXCEPT:

Theoretical capacity allows time for regular machine maintenance.

Theoretical capacity:

In general, if inventory increases during an accounting period,

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

If 800 units are produced and 1,200 units are sold, ________ results in the greatest amount of operating income.

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

Explain three methods under absorption costing that managers can use to improve operating income.

When production quantity exceeds sales, throughput costing results in reporting lower operating income than variable costing.

The downward demand spiral for a company is the continuing reduction in the demand for its products that occurs when competitor prices are NOT met.

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 variable costing?

Explain the difference between the gross margin format and the contribution margin format for the income statement. What information is highlighted with each?

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Advocates of throughput costing maintain that:

From the perspective of long-run product costing it is best to use:

Companies have recently been able to reduce inventory levels because:

________ provides the lowest estimate of denominator-level capacity.

The formula for computing the breakeven point in units under variable costing includes all of the following EXCEPT:

Theoretical capacity allows time for regular machine maintenance.

Theoretical capacity:

In general, if inventory increases during an accounting period,

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