Question 1

In absorption costing,all nonmanufacturing costs are subtracted from gross margin.

Accepted Answer

A) True 
 B)False

Question 2

Answer the following questions using the information below:
Healesville Animates produces and sells a luxury animal pillow for $40.00 per unit.In the first month of operation,3000 units were produced and 2250 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{ll}
\text { Variable manufacturing costs } & \$ 19 \text { per unit } \
\text { Variable marketing costs } & \$ 1 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 30000 \text { per month } \
\text { Administrative expenses, all fixed } & \$ 6000 \text { per month } \
\text { Ending inventories: } &\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 750 \text { units }
\end{array}$
-The difference between operating profits under variable costing and absorption costing centres on how to account for:

Accepted Answer

A) fixed manufacturing costs. 
B) direct materials costs. 
C) variable manufacturing costs. 
D) Both B and C are correct. 
A) fixed manufacturing costs. 
B) direct materials costs. 
C) variable manufacturing costs. 
D) Both B and C are correct.

Question 3

Managers can increase operating profit when absorption costing is used by producing more inventory.

Accepted Answer

A) True 
 B)False

Question 4

Lillee-Walker Company was concerned that increased sales did not result in increased profits for 2018.Both variable unit and total fixed manufacturing costs for 2017 and 2018 remained constant at $20 and $2 000 000,respectively.
In 2017,the company produced 100 000 units and sold 80 000 units at a price of $50 per unit.There was no beginning inventory in 2017.In 2018,the company made 70 000 units and sold 90 000 units at a price of $50.Selling and administrative expenses were all fixed at $100 000 each year.
Required:
a.Prepare income statements for each year using absorption costing.
b.Prepare income statements for each year using variable costing.
c.Explain why the income was different each year using the two methods.Show computations.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

@#IMG-DLM& 
c.Budgeted fixed manufacturing overhea

Question 5

Product costs used for pricing and product-mix decisions generally include:

Accepted Answer

A) design costs plus manufacturing costs. 
B) distribution costs only. 
C) all costs incurred along the value chain. 
D) manufacturing costs only. 
A) design costs plus manufacturing costs. 
B) distribution costs only. 
C) all costs incurred along the value chain. 
D) manufacturing costs only.

Question 6

Answer the following questions using the information below:
Queanbeyan Company incurred fixed manufacturing costs of $7200 during 2018.Other information for 2018 includes:
The budgeted denominator level is 800 units.
Units produced total 1000 units.
Units sold total 950 units.
Beginning inventory was zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold.
-Operating profit using absorption costing will be ________ operating profit if using variable costing.

Accepted Answer

A) $450 higher than 
B) $1350 lower than 
C) the same as 
D) $900 higher than 
A) $450 higher than 
B) $1350 lower than 
C) the same as 
D) $900 higher than

Question 7

Quality control costs may be a direct cost of the Manufacturing Department,but an indirect cost of an individual job.

Accepted Answer

A) True 
 B)False

Question 8

Under variable costing,if a manager's bonus is tied to operating profit,then increasing inventory levels compared to last year would result in:

Accepted Answer

A) increasing the manager's bonus. 
B) decreasing the manager's bonus. 
C) not affecting the manager's bonus. 
D) being unable to determine the manager's bonus using only the above information. 
A) increasing the manager's bonus. 
B) decreasing the manager's bonus. 
C) not affecting the manager's bonus. 
D) being unable to determine the manager's bonus using only the above information.

Question 9

Which of the following id NOT an example of the drawbacks of using absorption costing?

Accepted Answer

A) Operating profit solely reflects income from the sale of units and excludes the effects of manipulating production schedules 
B) Management has the ability to manipulate operating profit via production schedules 
C) Decreasing maintenance activities and increasing production result in increased operating profit 
D) Manipulation of operating profit may ultimately increase the company's costs incurred over the long run 
A) Operating profit solely reflects income from the sale of units and excludes the effects of manipulating production schedules 
B) Management has the ability to manipulate operating profit via production schedules 
C) Decreasing maintenance activities and increasing production result in increased operating profit 
D) Manipulation of operating profit may ultimately increase the company's costs incurred over the long run

Question 10

________ are subtracted from sales to calculate contribution margin.

Accepted Answer

A) Variable marketing costs 
B) Variable manufacturing costs 
C) Fixed manufacturing costs 
D) Both A and B are correct. 
A) Variable marketing costs 
B) Variable manufacturing costs 
C) Fixed manufacturing costs 
D) Both A and B are correct.

Question 11

When production deviates from the denominator level,a production-volume variance always exists under absorption costing.

Accepted Answer

A) True 
 B)False

Question 12

In the manufacturing plant,Margaret Thorpe is paid $20 an hour for straight-time and $30 an hour for overtime.One week she worked 46 hours,which included 6 hours of overtime,and 4 hours of idle time caused by material shortages.
Required:
a.What is Margaret's total compensation for the week?
b.What amount of compensation would be reported as direct manufacturing labour?
c.What amount of compensation would be reported as manufacturing overhead?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.Direct manufacturing labour (42 hours

Question 13

Match between columns
                        Premises:  Purchasing
 Billing
 Shipping
 Computer Support
 Personnel
 Customer Service

Accepted Answer

The Answer of Number of employees and Number of shipments is...

Question 14

A cost object is always either a product or a service.

Accepted Answer

A) True 
 B)False

Question 15

Match the list of representative cost drivers in the right column to the list of functions in the left column.
 $\begin{array}{|l|l|l|l|} 
\hline & \text { Function } & & \text { Representative Cost Driver } \
\hline \text { 1. } & \text { Purchasing } & \text { A. } & \text { Number of employees } \
\hline \text { 2. } & \text { Billing } & \text { B. } & \text { Number of shipments } \
\hline \text { 3. } & \text { Shipping } & \text { C. } & \text { Number of customers } \
\hline \text { 4. } & \text { Computer Support } & \text { D. } & \text { Number of invoices } \
\hline \text { 5. } & \text { Personnel } & \text { E. } & \text { Number of desktop computers } \
\hline \text { 6. } & \text { Customer Service } & \text { F. } & \text { Number of purchase orders }\\hline 
\end{array}$ 
Required:
Match each business function with its representative cost driver.
 $\begin{array}{|l|l|l|}
\hline& \text { Function } & \text { Insert letter of appropriate driver (A through F) } \
\hline \text { 1. } & \text { Purchasing } & \
\hline \text { 2. } & \text { Billing } & \
\hline 3 . & \text { Shipping } & \
\hline 4 . & \text { Computer Support } & \
\hline 5 . & \text { Personnel } & \
\hline 6 . & \text { Customer Service } & \
\hline
\end{array}$
 
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

\[\begin{array} { | l | l | c | } 
\hlin

Question 16

Which of the following relates to absorption costing?

Accepted Answer

A) Treats direct manufacturing costs as a period cost 
B) Includes fixed manufacturing overhead as an inventoriable cost 
C) Expenses marketing costs as cost of goods sold 
D) Is required for internal reports to managers 
A) Treats direct manufacturing costs as a period cost 
B) Includes fixed manufacturing overhead as an inventoriable cost 
C) Expenses marketing costs as cost of goods sold 
D) Is required for internal reports to managers

Question 17

Answer the following questions using the information below:
Leongatha Motors produces and sells an auto part for $30.00 per unit.In 2018,100 000 parts were produced and 75 000 units were sold.Other information for the year includes:
 $\begin{array}{lc}
\text { Direct materials } & \$ 12.00 \text { per unit } \
\text { Direct manufacturing labour } & \$ 2.25 \text { per unit } \
\text { Variable manufacturing costs } & \$ 0.75 \text { per urit } \
\text { Sales commissions } & \$ 3.00 \text { per part } \
\text { Fixed manufacturing costs } & \$ 375000 \text { per year } \
\text { Administrative expenses, all fixed } & \$ 135000 \text { per year }
\end{array}$
-What is the inventoriable cost per unit using absorption costing?

Accepted Answer

A) $15.00 
B) $18.00 
C) $18.75 
D) $21.75 
A) $15.00 
B) $18.00 
C) $18.75 
D) $21.75

Question 18

Which of the following cost(s)are inventoried when using absorption costing?

Accepted Answer

A) fixed manufacturing costs 
B) variable marketing costs 
C) direct manufacturing costs 
D) Both A and C are correct. 
A) fixed manufacturing costs 
B) variable marketing costs 
C) direct manufacturing costs 
D) Both A and C are correct.

Question 19

Which of the following is a 'mixed cost'?

Accepted Answer

A) Direct materials 
B) Manager's salary 
C) Monthly rent payment 
D) Monthly telephone bill 
A) Direct materials 
B) Manager's salary 
C) Monthly rent payment 
D) Monthly telephone bill

Question 20

Work-in-process inventory would normally include:

Accepted Answer

A) direct materials in stock and awaiting use in the manufacturing process. 
B) products in their original form intended to be sold without changing their basic form. 
C) goods fully completed by the firm but not yet sold. 
D) goods partially worked on but not yet fully completed. 
A) direct materials in stock and awaiting use in the manufacturing process. 
B) products in their original form intended to be sold without changing their basic form. 
C) goods fully completed by the firm but not yet sold. 
D) goods partially worked on but not yet fully completed.

In absorption costing,all nonmanufacturing costs are subtracted from gross margin.

Managers can increase operating profit when absorption costing is used by producing more inventory.

Product costs used for pricing and product-mix decisions generally include:

Quality control costs may be a direct cost of the Manufacturing Department,but an indirect cost of an individual job.

Under variable costing,if a manager's bonus is tied to operating profit,then increasing inventory levels compared to last year would result in:

Which of the following id NOT an example of the drawbacks of using absorption costing?

________ are subtracted from sales to calculate contribution margin.

When production deviates from the denominator level,a production-volume variance always exists under absorption costing.

A cost object is always either a product or a service.

Which of the following relates to absorption costing?

Which of the following cost(s)are inventoried when using absorption costing?

Which of the following is a 'mixed cost'?

Work-in-process inventory would normally include:

Management Accounting in Context

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 2: Different Costs for Different Purposes

In absorption costing,all nonmanufacturing costs are subtracted from gross margin.

Managers can increase operating profit when absorption costing is used by producing more inventory.

Product costs used for pricing and product-mix decisions generally include:

Quality control costs may be a direct cost of the Manufacturing Department,but an indirect cost of an individual job.

Under variable costing,if a manager's bonus is tied to operating profit,then increasing inventory levels compared to last year would result in:

Which of the following id NOT an example of the drawbacks of using absorption costing?

________ are subtracted from sales to calculate contribution margin.

When production deviates from the denominator level,a production-volume variance always exists under absorption costing.

A cost object is always either a product or a service.

Which of the following relates to absorption costing?

Which of the following cost(s)are inventoried when using absorption costing?

Which of the following is a 'mixed cost'?

Work-in-process inventory would normally include:

Management Accounting in Context

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

Inventory Management, Just-In-Time and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing and Multinational Considerations

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters