Exam 7: Absorption, Variable and Throughput Costing

PFA Ltd uses a throughput costing system and reported the following information for its first month of operations: Units produced…………………………………..140 Units sold………………………………………..120 Material cost per unit produced……………….$3.50 Conversion cost per unit produced……………$6.50 Fixed period costs per unit produced………….$6.00 Variable period costs per unit produced………$4.00 Selling price per unit…………………………$25.00 PFA's throughput cost of goods sold was

Shipp Ltd. budgets the following costs for a normal monthly volume of 500 units selling for $4,000 each. The profit (loss) using variable costing when 500 units are produced and 400 units are sold is

Brady Ltd uses a normal absorption costing system in which the overhead rate and variable manufacturing costs have remained unchanged for the last 2 years. During the current year the following activity occurred: The firm had no beginning or ending work in process inventories. However, there were 1,000 units in beginning finished goods. The number of units produced was

Shipp Ltd. budgets the following costs for a normal monthly volume of 500 units selling for $4,000 each. The profit (loss) using absorption costing when 500 units are produced and 400 units are sold is

Variable production overhead is allocated to inventory when using

Throughput costing income statements help managers determine the most efficient uses of resources in the short term.

JIT systems are incompatible with absorption costing systems.

Throughput costing is a modified form of

Which costing method matches costs and revenues most appropriately for generally accepted accounting principles?

Rubble Ltd develops an annual overhead budget at the start of each year (which has remained unchanged for the last 2 years), and closes any over- or underapplied overhead at year-end. For the firm's single product the following ending inventory levels have been experienced during the last 7 months: In how many months would variable costing profit be lower than absorption costing profit?

Variable costing profit for the period 1^st July through 30^th September was $400. Inventory data are as follows: What is the profit if absorption costing is used?

Which of the following are considered product costs in a throughput costing income statement? I Direct materials II Direct labor III Variable overhead

Fixed overhead costs are treated differently under variable costing and throughput costing.

Taylor Ltd just finished its second year of operations. In the first year it produced 1,000 units and sold 400. The second year resulted in the same production level, but sales were 1,200 units. The variable costing income statements for both years are shown below: The ending inventory for year 2 using absorption costing would be

The Australian Tax office requires managers to use practical capacity for tax reporting because it is more stable over time and therefore less easy to manipulate.

Exeter Ltd. introduced a new mass-produced specialty product early in the year. Production and sales of this product for the first four months are as follows: The firm's budgeted fixed overhead is $200,000, and budgeted output is 1,000 units per month. The volume variance, if any, is carried forward month-by-month and closed at the end of the year. When 1,000 units are produced and sold, expected monthly operating profit is $40,000. Compared to using absorption costing, using variable costing will result in operating profit for the 4-month period to be

Which of the following correctly identifies the best use for each costing method? E - External reporting P - Performance evaluations S - Short-term capacity decisions

Throughput costing income statements cannot be used to evaluate management performance.

What type of capacity is the upper capacity limit that takes into account the organisation's regularly scheduled times for production?

Under the variable costing method, fixed production overhead is