Question 1

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

Accepted Answer

Under absorption costing,both variable production costs and fixed production costs are combined.This makes it difficult to evaluate the effectiveness of cost controls by different levels of managers.Variable costing separates the variable costs from the fixed costs and,therefore,makes it easier to identify and assign control over costs.

Question 2

32 Degrees,Inc.,a manufacturer of frozen food,began operations on July 1 of the current year.During this time,the company produced 140,000 units and sold 140,000 units at a sales price of $125 per unit.Cost information for this period is shown in the following table:
 $$\begin{array}{l}
\text { Production costs }\
\begin{array} { l l } 
\text { Direct materials } & \$ 13.00 \text { per unit } \
\text { Direct labor } & \$ 6.00 \text { per unit } \
\text { Variable overhead } & \$ 2,100,000 \text { in total } \
\text { Fixed overhead } & \$ 3,220,000 \mathrm { in } \text { total } \
\text { Nonproduction costs } & \
\text { Variable selling ard administrative } & \$ 91,000 \mathrm { in } \text { total } \
\text { Fixed selling arnd administrative } & \$ 458,000 \mathrm { in } \text { total }
\end{array}
\end{array}$$ 
a.Prepare 32 Degree's December 31 income statement for the current year under absorption costing.
b.Prepare 32 Degree's December 31 income statement for the current year under variable costing.

Accepted Answer

a.
   b.

Question 3

Sindler Corporation sold 3,000 units of its product at a price of $13 per unit.Total variable cost per unit is $7.50,consisting of $6.80 in variable production cost and $.70 in variable selling and administrative cost.Compute contribution margin for the company.

Accepted Answer

A)  $39,000 
B)  $22,500 
C)  $16,500 
D)  $18,600 
E)  $36,900 
A)  $39,000 
B)  $22,500 
C)  $16,500 
D)  $18,600 
E)  $36,900 C

Question 4

Swisher,Incorporated reports the following annual cost data for its single product:
$\begin{array}{ll}
\text { Normal production level } & 30,000 \text { units } \
\text { Direct materials } & \$ 6.40 \text { per unit } \
\text { Direct labor } & \$ 3.93 \text { per unit } \
\text { Variable overhead } & \$ 5.80 \text { per unit } \
\text { Fixed overhead } & \$ 150,000 \text { in total }
\end{array}$

This product is normally sold for $48 per unit.If Swisher increases its production to 50,000 units,while sales remain at the current 30,000 unit level,by how much would the company's gross margin increase or decrease under absorption costing?

Accepted Answer

A)  $60,000 decrease. 
B)  $90,000 decrease. 
C)  There is no change in gross margin. 
D)  $90,000 increase. 
E)  $60,000 increase. 
A)  $60,000 decrease. 
B)  $90,000 decrease. 
C)  There is no change in gross margin. 
D)  $90,000 increase. 
E)  $60,000 increase.

Question 5

Absorption costing is also called ________________________ costing.

Accepted Answer

The answer of Absorption costing is also called ________________________ costing....

Question 6

The bottom line of a contribution margin report is net income.

Accepted Answer

A) True 
 B)False

Question 7

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

Accepted Answer

A) True 
 B)False

Question 8

Peapod Company,a manufacturer of slippers,began operations on May 1 of the current year.During this time,the company produced 200,000 units and sold 180,000 units at a sales price of $36 per unit.Cost information for this period is shown in the following table:
 $\begin{array}{ll}
\text {Production costs}\
\text { Direct materials } & \$ 4.00 \text { per unit } \
\text { Direct labor } & \$ 5.75 \text { per unit } \
\text { Variable overhead } & \$ 286,000 \text { in total } \
\text { Fixed overhead } & \$ 420,000 \text { in total }\
\text { Non-production costs}\
\text { Variable selling and administrative}& \$ 8,000\text { in total}\
\text { Fixed selling and administrative }&\$ 30,000\text {  in total}
\end{array}$ 
a.Prepare Peapod's December 31 income statement for the current year under absorption costing.
b.Prepare Peapod's December 31 income statement for the current year under variable costing.

Accepted Answer

a.
 @#IMG-DLM&_TB631

Question 9

A company is currently operating at 65% capacity producing 12,000 units.Cost information relating to this current production is shown in the following table:
 $$\begin{array} { | l | r | } 
\hline & \text { Per Unit } \
\hline \text { Sales price } & \$ 6 \
\hline \text { Direct material } & \$ 2.30 \
\hline \text { Direct labor } & \$ 0.87 \
\hline \begin{array} { l } 
\text { Variable } \
\text { overhead }
\end{array} & \$ 0.91 \
\hline \text { Fixed overhead } & \$ 0.70 \
\hline
\end{array}$$ 
The company has been approached by a customer with a request for a special order for 2,000 units.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

Accepted Answer

12,000/.65 - 12,000 = 6,461 un

Question 10

Reference: 19_01
Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.
 $$\begin{array} { l l } 
\text { Units produced this year } & 25,000 \text { units } \
\text { Units sold this year } & 15,000  \text { units } \ 
\text { Direct materials } & \$ 9 \text { per unit } \
\text { Direct labor } & \$ 11 \text { per unit } \
\text { Variable overhead } & \$ 75,000 \mathrm { in } \text { total } \
\text { Fixed overhead } & \$ 137,500 \mathrm { in } \text { total }
\end{array}$$
-Given Advanced Company's data,compute cost per unit of finished goods under variable costing.

Accepted Answer

A)  $20.00 
B)  $25.00 
C)  $21.88 
D)  $23.00 
E)  $28.50 
A)  $20.00 
B)  $25.00 
C)  $21.88 
D)  $23.00 
E)  $28.50

Question 11

Which of the following is not a product cost?

Accepted Answer

A)  Direct labor. 
B)  Indirect manufacturing costs. 
C)  Direct materials. 
D)  Manufacturing overhead. 
E)  Advertising costs. 
A)  Direct labor. 
B)  Indirect manufacturing costs. 
C)  Direct materials. 
D)  Manufacturing overhead. 
E)  Advertising costs.

Question 12

A company reports the following information regarding its production cost:
 $\begin{array}{ll}
\text { Units produced } & 22,000 \text { units } \
\text { Direct labor } & \$ 31 \text { per unit } \
\text { Direct materials } & \$ 27 \text { per unit } \
\text { Variable overhead } & ? \text { in total } \
\text { Fixed overhead } & \$ 2,750,000 \text { in tota }
\end{array}$
 
Required: Perform the following independent calculations.
a.Compute total variable overhead cost if the production cost per unit under variable costing is $240.
b.Compute total variable overhead cost if the production cost per unit under absorption costing is $240.

Accepted Answer

a.$31 DL + $27 DM + (VOH/22,000)VOH = $2

Question 13

Given the following data,calculate the total product cost per unit under variable costing.
$\begin{array}{|l|c|}
\hline \text { Direct labor } & \$ 3.50 \text { per unit } \
\hline \text { Direct materials } & \$ 1.25 \text { per unit } \
\hline \text { Overhead } & \
\hline \text { Total variable overhead } & \$ 41,400 \
\hline \text { Total fixed overhead } & \$ 150,000 \
\hline & \
\hline \text { Expected units to be produced } & 18,000 \text { units } \
\hline
\end{array}$

Accepted Answer

A)  $4.75 per unit 
B)  $7.05 per unit 
C)  $15.38 per unit 
D)  $13.08 per unit 
E)  $16 per unit 
A)  $4.75 per unit 
B)  $7.05 per unit 
C)  $15.38 per unit 
D)  $13.08 per unit 
E)  $16 per unit

Question 14

Reference: 19_01
Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.
 $$\begin{array} { l l } 
\text { Units produced this year } & 25,000 \text { units } \
\text { Units sold this year } & 15,000  \text { units } \ 
\text { Direct materials } & \$ 9 \text { per unit } \
\text { Direct labor } & \$ 11 \text { per unit } \
\text { Variable overhead } & \$ 75,000 \mathrm { in } \text { total } \
\text { Fixed overhead } & \$ 137,500 \mathrm { in } \text { total }
\end{array}$$
-Given Advanced Company's data,and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000,compute the net income under absorption costing.

Accepted Answer

A)  $55,000 
B)  $67,500 
C)  $80,500 
D)  $122,500 
E)  $205,000 
A)  $55,000 
B)  $67,500 
C)  $80,500 
D)  $122,500 
E)  $205,000

Question 15

Reference: 19_01
Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.
 $$\begin{array} { l l } 
\text { Units produced this year } & 25,000 \text { units } \
\text { Units sold this year } & 15,000  \text { units } \ 
\text { Direct materials } & \$ 9 \text { per unit } \
\text { Direct labor } & \$ 11 \text { per unit } \
\text { Variable overhead } & \$ 75,000 \mathrm { in } \text { total } \
\text { Fixed overhead } & \$ 137,500 \mathrm { in } \text { total }
\end{array}$$
-Given Advanced Company's data,compute cost of finished goods in inventory under variable costing.

Accepted Answer

A)  $285,000 
B)  $712,500 
C)  $427,500 
D)  $230,000 
E)  $345,000 
A)  $285,000 
B)  $712,500 
C)  $427,500 
D)  $230,000 
E)  $345,000

Question 16

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units,respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

Accepted Answer

$678,000 + (4,200 un

Question 17

Sea Company reports the following information regarding its production cost:
$\begin{array}{ll}
\text { Units produced } & 42,000 \text { units } \
\text { Direct labor } & \$ 35 \text { per unit } \
\text { Direct materials } & \$ 28 \text { per unit } \
\text { Variable overhead } & \$ 17 \text { per unit } \
\text { Fixed overhead } & \$ 105,000 \text { in total }
\end{array}$

Compute production cost per unit under absorption costing.

Accepted Answer

A)  $28.00 
B)  $82.50 
C)  $80.00 
D)  $63.00 
E)  $35.00 
A)  $28.00 
B)  $82.50 
C)  $80.00 
D)  $63.00 
E)  $35.00

Question 18

________________________ is the exact point where revenues equal expenses.

Accepted Answer

The answer of ________________________ is the exact point where revenues...

Question 19

Given the following data,total product cost per unit under variable costing is $10.75.
 $\begin{array}{|l|c|}
\hline \text { Direct labor } & \$ 7 \text { per unit } \
\hline \text { Direct materials } & \$ 1 \text { per unit } \
\hline \text { Overhead } & \
\hline \text { Total variable overhead } & \$ 20,000 \
\hline \text { Total fixed overhead } & \$ 90,000 \
\hline & \
\hline \text { Expected units to be produced } & 40,000 \text { units } \
\hline
\end{array}$

Accepted Answer

A) True 
 B)False

Question 20

During a given year if a company produces and sells the same number of units,then beginning inventory units equal ending inventory units.

Accepted Answer

A) True 
 B)False

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

Sindler Corporation sold 3,000 units of its product at a price of $13 per unit.Total variable cost per unit is $7.50,consisting of $6.80 in variable production cost and $.70 in variable selling and administrative cost.Compute contribution margin for the company.

Absorption costing is also called ________________________ costing.

The bottom line of a contribution margin report is net income.

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

Which of the following is not a product cost?

Given the following data,calculate the total product cost per unit under variable costing. Direct labor \ 3.50 per unit Direct materials \ 1.25 per unit Overhead Total variable overhead \ 41,400 Total fixed overhead \ 150,000 Expected units to be produced 18,000 units

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units,respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

Sea Company reports the following information regarding its production cost: Units produced 42,000 units Direct labor \ 35 per unit Direct materials \ 28 per unit Variable overhead \ 17 per unit Fixed overhead \ 105,000 in total Compute production cost per unit under absorption costing.

________________________ is the exact point where revenues equal expenses.

Given the following data,total product cost per unit under variable costing is $10.75. Direct labor \ 7 per unit Direct materials \ 1 per unit Overhead Total variable overhead \ 20,000 Total fixed overhead \ 90,000 Expected units to be produced 40,000 units

During a given year if a company produces and sells the same number of units,then beginning inventory units equal ending inventory units.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing

Activity-Based Costing and Analysis

Cost-Volume-Profit Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Decentralization and Performance Measurement

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Accounting With Special Journals

Time Value of Money

Investments and International Operations

Accounting for Partnerships

Filters

Exam 19: Variable Costing and Performance Reporting

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

Sindler Corporation sold 3,000 units of its product at a price of $13 per unit.Total variable cost per unit is $7.50,consisting of $6.80 in variable production cost and $.70 in variable selling and administrative cost.Compute contribution margin for the company.

Absorption costing is also called ________________________ costing.

The bottom line of a contribution margin report is net income.

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

Which of the following is not a product cost?

Given the following data,calculate the total product cost per unit under variable costing. Direct labor \ 3.50 per unit Direct materials \ 1.25 per unit Overhead Total variable overhead \ 41,400 Total fixed overhead \ 150,000 Expected units to be produced 18,000 units

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units,respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

Sea Company reports the following information regarding its production cost: Units produced 42,000 units Direct labor \ 35 per unit Direct materials \ 28 per unit Variable overhead \ 17 per unit Fixed overhead \ 105,000 in total Compute production cost per unit under absorption costing.

________________________ is the exact point where revenues equal expenses.

Given the following data,total product cost per unit under variable costing is $10.75. Direct labor \ 7 per unit Direct materials \ 1 per unit Overhead Total variable overhead \ 20,000 Total fixed overhead \ 90,000 Expected units to be produced 40,000 units

During a given year if a company produces and sells the same number of units,then beginning inventory units equal ending inventory units.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing

Activity-Based Costing and Analysis

Cost-Volume-Profit Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Decentralization and Performance Measurement

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Accounting With Special Journals

Time Value of Money

Investments and International Operations

Accounting for Partnerships

Filters