Question 1

The traditional costing approach assigns all manufacturing costs to products.

Accepted Answer

A) True 
 B)False

Question 2

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared under absorption costing.

Accepted Answer

A) True 
 B)False

Question 3

Triton Industries reports the following information regarding its production cost:
 $\begin{array}{ll}
\text { Units produced } & 77,000 \text { units } \
\text { Direct labor } & \$ 27 \text { per unit } \
\text { Direct materials } & \$ 12 \text { per unit } \
\text { Variable overhead } & \$ 2,541,000 \text { in total } \
\text { Fixed overhead } & \$ 3,311,000 \text { in total }
\end{array}$
 
a.Compute production cost per unit under variable costing.
b.Compute production cost per unit under absorption costing.

Accepted Answer

a.$27 DL + $12 DM + ($2,541,00

Question 4

When excess capacity exists,managers should accept a special order if the special order price exceeds the ________________________.

Accepted Answer

total vari

Question 5

_______________ and _______________ are product costs that can be directly traced to the product.

Accepted Answer

Direct lab

Question 6

Identify the treatment of each of the following costs under variable costing and absorption costing:

Accepted Answer

@#IMG-DLM&_TB6312_00

Question 7

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 variable 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 8

Countdown Inc.sold 17,000 units of its product at a price of $81 per unit.Total variable cost per unit is $72.09,consisting of $69.05 in variable production cost and $3.04 in variable selling and administrative cost.Compute the contribution margin for the company.

Accepted Answer

$81.00 - $

Question 9

Dent Corporation had net income of $182,000 based on variable costing.Beginning and ending inventories were 5,000 units and 8,000 units,respectively.Assume the fixed overhead per unit was $3 for both the beginning and ending inventory.What is net income under absorption costing?

Accepted Answer

A)  $173,000 
B)  $221,000 
C)  $191,000 
D)  $143,000 
E)  $185,000 
A)  $173,000 
B)  $221,000 
C)  $191,000 
D)  $143,000 
E)  $185,000

Question 10

Which of the following statements is true?

Accepted Answer

A)  Variable costing treats fixed overhead as a period cost. 
B)  Absorption costing treats fixed overhead as a period cost. 
C)  Absorption costing treats fixed overhead as an expense in the period it is incurred. 
D)  Variable costing excludes all overhead from product costs. 
E)  Managers can manipulate earnings more easily under variable costing by varying the production level. 
A)  Variable costing treats fixed overhead as a period cost. 
B)  Absorption costing treats fixed overhead as a period cost. 
C)  Absorption costing treats fixed overhead as an expense in the period it is incurred. 
D)  Variable costing excludes all overhead from product costs. 
E)  Managers can manipulate earnings more easily under variable costing by varying the production level.

Question 11

Absorption costing is not permitted under GAAP.

Accepted Answer

A) True 
 B)False

Question 12

Under absorption costing,which of the following statements is not true?

Accepted Answer

A)  Over production and inventory buildup can occur because of how managers are evaluated and rewarded. 
B)  The fixed costs per unit decline as more units are produced. 
C)  Variable inventory costs are treated in the same manner as they are under variable costing. 
D)  Fixed inventory costs are treated in the same manner as they are under variable costing. 
E)  All manufacturing costs are assigned to products. 
A)  Over production and inventory buildup can occur because of how managers are evaluated and rewarded. 
B)  The fixed costs per unit decline as more units are produced. 
C)  Variable inventory costs are treated in the same manner as they are under variable costing. 
D)  Fixed inventory costs are treated in the same manner as they are under variable costing. 
E)  All manufacturing costs are assigned to products.

Question 13

During a given year,if a company produces more units than it sells,then ending inventory units will be less than beginning inventory units.

Accepted Answer

A) True 
 B)False

Question 14

Assume a company had the following production costs:
 $\begin{array}{ll}
\text { Direct labor } & \$ 20,000 \
\text { Direct material } & \$ 30,000 \
\text { Variable overhead } & \$ 40,000 \
\text { Fixed overhead } & \$ 50,000
\end{array}$
 
Under absorption costing,the total production cost per unit when 4,000 units are produced would be $22.50.

Accepted Answer

A) True 
 B)False

Question 15

Multiplying the contribution margin ratio by the expected change in sales equals the expected change in contribution margin.

Accepted Answer

A) True 
 B)False

Question 16

Shore Company reports the following information regarding its production cost.
$\begin{array}{ll}
\text { Units produced } & 28,000 \text { units } \
\text { Direct labor } & \$ 23 \text { per unit } \
\text { Direct materials } & \$ 24 \text { per unit } \
\text { Variable overhead } & \$ 280,000 \mathrm{in} \text { total } \
\text { Fixed overhead } & \$ 94,920 \mathrm{in} \text { total }
\end{array}$

Compute production cost per unit under absorption costing.

Accepted Answer

A)  $57.00 
B)  $60.39 
C)  $47.00 
D)  $23.00 
E)  $24.00 
A)  $57.00 
B)  $60.39 
C)  $47.00 
D)  $23.00 
E)  $24.00

Question 17

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

Accepted Answer

A)  $8 per unit 
B)  $8.50 per unit 
C)  $10.25 per unit 
D)  $10.75 per unit 
E)  $12 per unit 
A)  $8 per unit 
B)  $8.50 per unit 
C)  $10.25 per unit 
D)  $10.75 per unit 
E)  $12 per unit

Question 18

Given the following data,total product cost per unit under absorption costing is $9.14.
 $\begin{array}{|l|c|}
\hline \text { Direct labor } & \$ 0.72 \text { per unit } \
\hline \text { Direct materials } & \$ 0.80 \text { per unit } \
\hline \text { Overhead } & \
\hline \text { Total variable overhead } & \$ 202,500 \
\hline \text { Total fixed overhead } & \$ 140,400 \
\hline & \
\hline \text { Expected units to be produced } & 45,000 \text { units } \
\hline
\end{array}$

Accepted Answer

A) True 
 B)False

Question 19

Heather,Incorporated reports the following annual cost data for its single product:
 $\begin{array}{ll}
\text { Normal production and sales level } & 60,000 \text { units } \
\text { Direct materials } & \$ 9.00 \text { per unit } \
\text { Direct labor } & \$ 6.50 \text { per unit } \
\text { Variable overhead } & \$ 11.00 \text { per unit } \
\text { Fixed overhead } & \$ 720,000 \text { in total }
\end{array}$
 
This product is normally sold for $56 per unit.If Heather increases its production to 80,000 units while sales remain at the current 60,000 unit level,by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

Accepted Answer

$720,000/60,000 units = $12 FOH per unit

Question 20

How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences.
(a) Units produced equal units sold
(b) Units produced exceed units sold
(c) Units produced are less than units sold

Accepted Answer

(a)  Income is identical under variable

Exam 19: Variable Costing and Performance Reporting

The traditional costing approach assigns all manufacturing costs to products.

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared under absorption costing.

When excess capacity exists,managers should accept a special order if the special order price exceeds the ________________________.

_______________ and _______________ are product costs that can be directly traced to the product.

Identify the treatment of each of the following costs under variable costing and absorption costing:

Countdown Inc.sold 17,000 units of its product at a price of $81 per unit.Total variable cost per unit is $72.09,consisting of $69.05 in variable production cost and $3.04 in variable selling and administrative cost.Compute the contribution margin for the company.

Dent Corporation had net income of $182,000 based on variable costing.Beginning and ending inventories were 5,000 units and 8,000 units,respectively.Assume the fixed overhead per unit was $3 for both the beginning and ending inventory.What is net income under absorption costing?

Which of the following statements is true?

Absorption costing is not permitted under GAAP.

Under absorption costing,which of the following statements is not true?

During a given year,if a company produces more units than it sells,then ending inventory units will be less than beginning inventory units.

Assume a company had the following production costs: Direct labor \ 20,000 Direct material \ 30,000 Variable overhead \ 40,000 Fixed overhead \ 50,000 Under absorption costing,the total production cost per unit when 4,000 units are produced would be $22.50.

Multiplying the contribution margin ratio by the expected change in sales equals the expected change in contribution margin.

Shore Company reports the following information regarding its production cost. Units produced 28,000 units Direct labor \ 23 per unit Direct materials \ 24 per unit Variable overhead \ 280,000 total Fixed overhead \ 94,920 total Compute production cost per unit under absorption costing.

Given the following data,calculate product cost per unit under variable costing. 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

Given the following data,total product cost per unit under absorption costing is $9.14. Direct labor \ 0.72 per unit Direct materials \ 0.80 per unit Overhead Total variable overhead \ 202,500 Total fixed overhead \ 140,400 Expected units to be produced 45,000 units

How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences. (a) Units produced equal units sold (b) Units produced exceed units sold (c) Units produced are less than units sold

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

_ and _ are product costs that can be directly traced to the product.