Exam 7: Absorption, Variable and Throughput Costing

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 fixed overhead in cost of goods sold amounted to

When units produced are equal to units sold, operating profit under absorption costing will equal operating profit under variable costing.

Bella Ltd has operated for 2 years. During that time it produced 1,000 units in year 1 and 800 in year 2, while sales were 800 units in year 1 and 900 in year 2. Variable production costs were $8 per unit during both years. The company uses last-in, first-out (LIFO) for inventory costing. The absorption costing income statements for these 2 years were: Operating profit for year 2 using variable costing would be

Throughput contribution is computed as

Theoretical capacity and practical capacity are demand-based capacity measurements.

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 contribution was

Direct material and direct labor costs are assigned to inventory when using I Absorption costing II Throughput costing III Variable costing

The chief executive officer told Nick, the production manager at BRS Ltd, to reduce costs and increase profits. In response, Nick decided to produce more units for inventory. BRS is most likely using

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 Total period costs reported on PFA's throughput costing income statement were

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. If variable costing had been used, operating profit would be

Throughput costing can be used for I Internal reporting II External reporting III Income tax reporting

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 in ending finished goods inventory was

Budgeted capacity is always greater than normal capacity.

When calculating an estimated fixed production cost overhead allocation rate, accountants choose the

In a throughput costing system, all overhead costs are treated as I Period costs II Fixed costs III Deductions from throughput contribution

The capacity level which assumes continuous, uninterrupted production 365 days per year is called

Variable costing does not conform to GAAP because it does not match manufacturing costs with revenues.

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. In which month(s) was variable costing profit higher than absorption costing profit?

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 equal to absorption costing profit?

General Ltd. budgeted fixed overhead costs of $25,000 per quarter and 1,000 units per quarter in its normal absorption costing system. Any volume variance is carried forward and closed at year-end. The company experienced the following activity: The volume variance in quarter 1 was