Exam 8: Absorption and Variable Costing, and Inventory Management

Shark Corporation The following information pertains to Shark Corporation: Beginning inventory 0 units Ending Finished Goods Inventory 6,000 units Direct labour per unit \ 22 Direct materials per unit 18 Variable manufacturing overhead per unit 6 Fixed manufacturing overhead per unit 12 Variable selling costs per unit 14 Fixed selling costs per unit 16 -Refer to Shark Corporation. What is the value of ending Finished Goods Inventory using the absorption costing method?

Which of the following best defines variable costing?

Fellow's Manufacturing Company produces three products: X, Y, and Z. The income statement for this year is as follows: Sales \ 200,000 Less: Variable expenses 127,000 Contribution margin \7 3,000 Less fixed expenses: Manufacturing \ 20,000 Selling and administrative 14,000 34,000 Net income \3 9,000 The sales, contribution margin ratios, and direct fixed expenses for the three types of products are as follows: X Y Z Sales \ 60,000 \ 40,000 \ 100,000 Contribution margin ratio 35\% 30\% 40\% Direct fixed expenses of products \ 8,000 \ 5,000 \ 4,000 Required: Prepare income statements segmented by products. Include a column for the entire firm in the statement.

Which accounting method is used for external reporting?

On a segmented income statement, fixed costs are broken down into direct fixed costs and overall fixed costs.

Shark Corporation The following information pertains to Shark Corporation: Beginning inventory 0 units Ending Finished Goods Inventory 6,000 units Direct labour per unit \ 22 Direct materials per unit 18 Variable manufacturing overhead per unit 6 Fixed manufacturing overhead per unit 12 Variable selling costs per unit 14 Fixed selling costs per unit 16 -Refer to Shark Corporation. What is the relationship between absorption costing net income and variable costing net income?

Select the appropriate classification of each of the costs listed below.* Each classification may be used more than once, and it is possible that one or more of the classifications may not be used at all. -Fixed selling expense

Which statement best describes the general relationship between inventory values calculated using the variable costing method and inventory values calculated using the absorption costing method?

Triple M Company Triple M Company had the following data for the month: Variable costs per unit: Direct materials \ 4.00 Direct labour 3.20 Variable manufacturing overhead 1.00 Variable selling expenses 0.40 Fixed manufacturing overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. The company started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at sales price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600. -Refer to Triple M Company. What is the unit product cost using the absorption costing method?

Absorption costing income statements and variable costing income statements may differ because of their treatment of fixed manufacturing overhead costs.

Green Bluff Assume the following information for the #1 Product Line for Green Bluff: Sales \ 600,000 Variable manufacturing expenses 120,000 Direct fixed manufacturing expenses 75,000 Variable selling and administrative expenses 65,000 Direct fixed selling and administrative expenses 60,000 -Refer to Green Bluff. What is the contribution margin of the product line?

Triple M Company Triple M Company had the following data for the month: Variable costs per unit: Direct materials \ 4.00 Direct labour 3.20 Variable manufacturing overhead 1.00 Variable selling expenses 0.40 Fixed manufacturing overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. The company started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at sales price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600. -Refer to Triple M Company. What is the unit product cost using the variable costing method?

Which inventory cost can include lost sales, cost of expediting, and cost of interrupted production?

Product cost includes all costs of the company.

Westwood Company Westwood Company has the following information the current year: Selling sales price \ 300 per unit Variable production costs \ 80 per unit produced Variable selling and administrative expenses \ 32 per unit sold Fixed production costs \ 400,000 Fixed selling and administrative expenses \ 280,000 Units produced 20,000 units Units sold 16,000 units The company had no beginning inventories -Refer to Westwood Company. What is the net income using the absorption costing method?

List three problems that inventory is meant to solve. How does the JIT producer handle these problems?

Shark Corporation The following information pertains to Shark Corporation: Beginning inventory 0 units Ending Finished Goods Inventory 6,000 units Direct labour per unit \ 22 Direct materials per unit 18 Variable manufacturing overhead per unit 6 Fixed manufacturing overhead per unit 12 Variable selling costs per unit 14 Fixed selling costs per unit 16 -Refer to Shark Corporation. What is the value of ending Finished Goods Inventory using the variable costing method?

Which cost is NOT included in inventory using the absorption costing method?

Which of the following reflects the two major costs associated with inventory assuming demand is known with certainty?

How will net income react using the variable costing method, assuming monthly production volume is constant but fewer items are sold during the period than are produced in that same period?