Question 1

Under throughput costing, inventory is valued using

Accepted Answer

A)  Direct materials costs only 
B)  Prime costs only 
C)  Variable costs only 
D)  Conversion costs only 
A)  Direct materials costs only 
B)  Prime costs only 
C)  Variable costs only 
D)  Conversion costs only

Question 2

Direct materials costs are deducted from revenues when units are sold under which of the following costing method(s)? I Absorption
II Throughput
III Variable

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III

Question 3

Absorption costing income statements typically include "gross margin" as a line item.

Accepted Answer

A) True 
 B)False

Question 4

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 ending inventory was

Accepted Answer

A)  $70 
B)  $200 
C)  $0 
D)  $490 
A)  $70 
B)  $200 
C)  $0 
D)  $490

Question 5

Absorption costing systems subtract inventoried costs from revenues at the time of production.

Accepted Answer

A) True 
 B)False

Question 6

On a variable costing income statement, costs are grouped according to their behavior.

Accepted Answer

A) True 
 B)False

Question 7

The difference between practical capacity and theoretical capacity is

Accepted Answer

A)  Budgeted fixed costs 
B)  Expected downtimes 
C)  Excess capacity 
D)  Nothing, because the two terms have the same meaning 
A)  Budgeted fixed costs 
B)  Expected downtimes 
C)  Excess capacity 
D)  Nothing, because the two terms have the same meaning

Question 8

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 variable product cost per unit was

Accepted Answer

A)  $4.90 
B)  $5.15 
C)  $4.00 
D)  $4.25 
A)  $4.90 
B)  $5.15 
C)  $4.00 
D)  $4.25

Question 9

Which of the following types of capacity can result in an unrealistically small fixed overhead allocation rate if used as an allocation base?

Accepted Answer

A)  Normal capacity 
B)  Theoretical capacity 
C)  Budgeted capacity 
D)  Practical capacity 
A)  Normal capacity 
B)  Theoretical capacity 
C)  Budgeted capacity 
D)  Practical capacity

Question 10

Exter Manufacturing experienced the following activity over the last four years.   The firm's estimated fixed overhead allocation rate was unchanged over the 4 years at $200 per unit, based on budgeted fixed overhead of $200,000 and 1,000 units of output. The volume variance is closed to the cost of goods sold each year. Exter maintains an absorption costing system. The volume variance for Year 2 is

Accepted Answer

A)  $40,000 Unfavorable 
B)  $60,000 Favorable 
C)  $100,000 Unfavorable 
D)  $20,000 Favorable 
A)  $40,000 Unfavorable 
B)  $60,000 Favorable 
C)  $100,000 Unfavorable 
D)  $20,000 Favorable

Question 11

During its first year of operations, Kima Ltd. experienced the following: If Kima calculates operating profit under the variable costing method as opposed to the absorption costing method, operating profit will be

Accepted Answer

A)  $45,000 lower 
B)  $270,000 lower 
C)  $315,000 higher 
D)  $270,000 higher 
A)  $45,000 lower 
B)  $270,000 lower 
C)  $315,000 higher 
D)  $270,000 higher

Question 12

Theoretical capacity is a supply-based capacity measurement.

Accepted Answer

A) True 
 B)False

Question 13

Which costing method(s) conform with GAAP?

Accepted Answer

A)  Yes/No/No 
B)  Yes/No/Yes 
C)  No/Yes/Yes 
D)  No/No/Yes Section: 
A)  Yes/No/No 
B)  Yes/No/Yes 
C)  No/Yes/Yes 
D)  No/No/Yes Section:

Question 14

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:   Cost of goods sold for year 1 using variable costing would be

Accepted Answer

A)  $6,400 
B)  $8,800 
C)  $8,000 
D)  $7,600 
A)  $6,400 
B)  $8,800 
C)  $8,000 
D)  $7,600

Question 15

Throughput costing is a modified form of absorption costing that treats direct labor and variable overhead as period expenses.

Accepted Answer

A) True 
 B)False

Question 16

Synonyms for variable costing include direct costing and marginal costing.

Accepted Answer

A) True 
 B)False

Question 17

In a throughput costing income statement, the throughput contribution is calculated as revenues - direct materials costs.

Accepted Answer

A) True 
 B)False

Question 18

In absorption costing systems, costs on the income statement are classified by their behavior.

Accepted Answer

A) True 
 B)False

Question 19

An estimated fixed overhead allocation rate

Accepted Answer

A)  Is unrealistically large if determined using theoretical capacity 
B)  Can be considered an estimated cost of capacity per unit 
C)  Is usually based on theoretical capacity 
D)  Does not provide information about opportunity costs of unused capacity 
A)  Is unrealistically large if determined using theoretical capacity 
B)  Can be considered an estimated cost of capacity per unit 
C)  Is usually based on theoretical capacity 
D)  Does not provide information about opportunity costs of unused capacity

Question 20

Any costs traced or allocated to inventory are expensed when units are sold in which of the following costing method(s)? I Absorption
II Throughput
III Variable

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III 
A)  I and II only 
B)  II and III only 
C)  I and III only 
D)  I, II, and III

Under throughput costing, inventory is valued using

Direct materials costs are deducted from revenues when units are sold under which of the following costing method(s)? I Absorption II Throughput III Variable

Absorption costing income statements typically include "gross margin" as a line item.

Absorption costing systems subtract inventoried costs from revenues at the time of production.

On a variable costing income statement, costs are grouped according to their behavior.

The difference between practical capacity and theoretical capacity is

Which of the following types of capacity can result in an unrealistically small fixed overhead allocation rate if used as an allocation base?

During its first year of operations, Kima Ltd. experienced the following: If Kima calculates operating profit under the variable costing method as opposed to the absorption costing method, operating profit will be

Theoretical capacity is a supply-based capacity measurement.

Which costing method(s) conform with GAAP?

Throughput costing is a modified form of absorption costing that treats direct labor and variable overhead as period expenses.

Synonyms for variable costing include direct costing and marginal costing.

In a throughput costing income statement, the throughput contribution is calculated as revenues - direct materials costs.

In absorption costing systems, costs on the income statement are classified by their behavior.

An estimated fixed overhead allocation rate

Any costs traced or allocated to inventory are expensed when units are sold in which of the following costing method(s)? I Absorption II Throughput III Variable

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Cost-Volume-Profit Cvp Analysis

Job Costing Systems

Process Costing Systems

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

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Exam 7: Absorption, Variable and Throughput Costing

Under throughput costing, inventory is valued using

Direct materials costs are deducted from revenues when units are sold under which of the following costing method(s)? I Absorption II Throughput III Variable

Absorption costing income statements typically include "gross margin" as a line item.

Absorption costing systems subtract inventoried costs from revenues at the time of production.

On a variable costing income statement, costs are grouped according to their behavior.

The difference between practical capacity and theoretical capacity is

Which of the following types of capacity can result in an unrealistically small fixed overhead allocation rate if used as an allocation base?

During its first year of operations, Kima Ltd. experienced the following: If Kima calculates operating profit under the variable costing method as opposed to the absorption costing method, operating profit will be

Theoretical capacity is a supply-based capacity measurement.

Which costing method(s) conform with GAAP?

Throughput costing is a modified form of absorption costing that treats direct labor and variable overhead as period expenses.

Synonyms for variable costing include direct costing and marginal costing.

In a throughput costing income statement, the throughput contribution is calculated as revenues - direct materials costs.

In absorption costing systems, costs on the income statement are classified by their behavior.

An estimated fixed overhead allocation rate

Any costs traced or allocated to inventory are expensed when units are sold in which of the following costing method(s)? I Absorption II Throughput III Variable

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Cost-Volume-Profit Cvp Analysis

Job Costing Systems

Process Costing Systems

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Standard Costs, Flexible Budgets and Variance Analysis

Operational Budgets

Strategy and Control

Planning and Budgeting for Strategic Success

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters