Exam 21: Variable Costing

Chou Computer Services provides services to corporate and individual customers. During the month of June, the corporate business segment provided services to 300 customers and earned $60,000 in revenue. The individual business segment provided services to 400 customers and earned $35,000 in revenue. The variable costs for the corporate and individual business segments amounted to $32,500 and $25,300, respectively. In addition, the fixed costs of the company amounted to $8000. The contribution margin ratios of the corporate segment and individual segment are ________, respectively. (Round your answers two decimal places.)

Happy Home, Inc. provides housekeeping services. The following financial data have been provided. Service Revenue \ 80,000 Cleaning Supplies Used 21,500 Wages Expense 18,350 Office Rent Expense 5350 Depreciation Expense- Machinery 750 Calculate the operating income for the company.

Variable costing prepares the income statement using the traditional format.

In variable costing, all fixed manufacturing overhead costs are expensed in the period incurred.

When production is greater than sales, the operating income will be higher under absorption costing than variable costing. Assume zero beginning and ending inventories. Which of the following gives the correct reason for the above statement?

Amarantha Corp. has provided the following data for the current year. Units produced 2,500 units Sales price \ 200 per unit Direct materials \ 75 per unit Direct labor \ 65 per unit Variable manufacturing overhead \ 25 per unit Fixed manufacturing overhead \ 225,000 per year Variable selling and administrative costs \ 30 per unit Fixed selling and administrative costs \ 150,000 per year Calculate the unit product cost using absorption costing and variable costing.

Last year, Adara Company produced 5000 units and sold 3000 units. The company had no beginning inventory. They incurred the following costs: Direct materials per unit \ 13 Direct labor per unit \ 7 Variable overhead per unit \ 4 Total fixed manufacturing \ 20,000 pverhead Total selling and administrative \ 70,000 Adara's product cost per unit under absorption costing is

Managers do not consider the sales mix when making decisions because it does not affect the overall profitability of the company.

A business segment is an identifiable part of the company for which financial information is available.

Pathways Careers, Inc. has two products-Resume Reader and Cover Letter Cure. Financial data for both the products follow: Resume Reader Cover Letter Cure Units sold 2000 units 600 units Sales price per unit \ 700 \ 1200 Variable manufacturing cost per unit 310 650 Sales commission (\% of sales) 5\% 3\% Pathways has two sales representatives-Curtis Muller and Willow Brown. Each sales representative sold a total of 1300 units during the month of March. Curtis had a sales mix of 80% Resume Reader and 20% Cover Letter Cure. Willow had a sales mix of 60% Resume Reader and 40% Cover Letter Cure. Based on the above information, calculate Willow's total contribution to company profits.

Which of the following will appear as a line item in the traditional format of an income statement?

When there are no beginning or ending balances in Finished Goods Inventory, variable and absorption costing will result in ________.

Absorption costing is more appropriate than variable costing for making plant production capacity decisions in the long run.

Absorption costing is required by the Generally Accepted Accounting Principles (GAAP) for financial statements issued to investors, creditors, and other external users.

Contribution margin is calculated by deducting ________ from sales revenue.

Louie's Music produces harmonicas that it sells for $12 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of harmonicas to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Louie's Music's first month in business: Jnuary 2019 Units produced and sold: Sales in units 1,200 Production in units 1,400 Variable manufacturing cost per harmonica \ 4 Sales commission cost per harmonica \ 1 Total fixed manufacturing overhead \ 2,800 Total fixed selling and administrative costs \ 2,100 Requirements 1. Compute the product cost per harmonica produced under absorption costing. 2. Prepare an income statement for January, 2019

When setting sales prices in the long run, the sales price must cover the full cost-including fixed costs.

Trillium, Inc. reports the following information for April: Alpha Beta Units sold 4000 units 700 units Sales price per unit \ 300 \ 700 Variable manufacturing cost per unit 200 500 Sales commission per unit: Alpha: 4\% of sales price 12 Beta: 8\% of sales price 56 What is the contribution margin ratio of Beta? (Round your answer to two decimal places.)

The contribution margin format of the income statement categorizes costs by their behavior.

Adventures Company provides event management services. The company has three employees, each assigned to specific customers. The company considers each employee's territory as a business segment. The following data relate to its three segments for the month of June: Francisco Liu Jordan Sale Revenue \ 8000 \ 12,800 \ 13,350 Variable costs \ 5700 \ 5200 \ 10,500 The business segments had the following number of customers: Francisco, 24 ; Liu, 28; and Jordan, 33. The total fixed costs for the month of June amount to $3400. Which business segment was the most profitable?