Exam 9: Inventory Costing and Capacity Analysis

Answer the following questions using the information below: Barry's Hobbies produces and sells a luxury animal pillow for $80.00 per unit. In the first month of operation, 3,000 units were produced and 2,250 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: -What is gross margin when using absorption costing?

When variable costing is used, an income statement will show contribution margin.

Variable costing:

The difference in operating income under absorption costing and variable costing is due solely to the timing difference of expensing fixed manufacturing costs.

Which method is NOT a way to discourage producing for inventory?

________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs.

Ireland Corporation planned to be in operation for three years. Required: a. Prepare an income statement for each year using absorption costing. b. Prepare an income statement for each year using variable costing.

Many companies use variable costing for internal reporting to reduce the undesirable incentive to build up inventories.

Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles)for external financial reporting?

Throughput contribution equals:

Challenges only result from estimating the denominator level, but NOT the costs in the numerator of the fixed manufacturing cost rate.

Given a constant contribution margin per unit and constant fixed costs, the period-to-period change in operating income under variable costing is driven solely by:

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

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. -The production-volume variance is:

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 expensed on the income statement (excluding adjustments for variances)total:

The budgeted fixed manufacturing cost rate is the lowest for:

Answer the following questions using the information below: Goldfarb Company produces a specialty item. Management has provided the following information: -What is the total throughput contribution?

The effect of spreading fixed manufacturing costs over a shrinking master-budget capacity utilization amount results in:

The main difference between variable costing and absorption costing is the way in which fixed manufacturing costs are accounted for.

Theoretical capacity is the level of capacity based on producing at full efficiency all the time.