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

A) $480,000 B) $600,000 C) $1,200,000 D) $2,328,000 A) $480,000 B) $600,000 C) $1,200,000 D) $2,328,000

Raymond Company Raymond Company reported the following units of production and sales for June and July: \[\begin{array} { l r r } & \text { Units } & \text { Units } \\ \text { Month } & \text { Produced } & \text { Sold } \\ \text { June } & 100,000 & 90,000 \\ \text { July } & 100,000 & 105,000 \end{array}\] Net income using the absorption costing method for June was $40,000; net income using the variable costing method for July was $50,000. Fixed manufacturing costs were $600,000 for each month. -Refer to Raymond Company. What was the net income for July using the absorption costing method?

A) $20,000 B) $40,000 C) $50,000 D) $80,000 A) $20,000 B) $40,000 C) $50,000 D) $80,000

Nute Corporation The following information pertains to Nute Corporation (the per unit amounts apply to all years): \[\begin{array} { l l } \text { Beginning inventory } & 1,000 \text { units } \\ \text { Ending Finished Goods Inventory } & 6,000 \text { units } \\ \text { Direct labour per unit } & \$ 40 \\ \text { Direct materials per unit } & 20 \\ \text { Variable manufacturing overhead per unit } & 10 \\ \text { Fixed manufacturing overhead per unit } & 30 \\ \text { Variable selling and administrative costs per unit } & 6 \\ \text { Fixed selling and administrative costs per unit } & 14 \end{array}\] -Refer to Nute Corporation. What is the relationship between absorption costing net income and variable costing net income?

A) Absorption costing net income is $150,000 less. B) Absorption costing net income is $150,000 greater. C) Absorption costing net income is $240,000 less. D) Absorption costing net income is $240,000 greater. A) Absorption costing net income is $150,000 less. B) Absorption costing net income is $150,000 greater. C) Absorption costing net income is $240,000 less. D) Absorption costing net income is $240,000 greater.

Ella Company Last year, Ella Company produced 10,000 units and sold 9,000 units at a sales price of $9 per unit. Costs for last year were as follows: \[\begin{array} { |l | r | } \hline\text { Direct materials } & \$ 10,000 \\ \hline \text { Direct labour } & 15,000 \\ \hline \text { Variable manufacturing overhead } & 5,000 \\ \hline \text { Fixed manufacturing overhead } & 20,000 \\ \hline \text { Variable selling expense } & 7,200 \\ \hline \text { Fixed selling expense } & 5,000 \\ \hline \text { Fixed administrative expense } & 12,000 \\ \hline \end{array}\] Fixed manufacturing overhead is applied on the basis of expected production. Last year, the company expected to produce 10,000 units.The company had no beginning inventories. -Refer to Ella Company. What is the operating income using the variable costing method?

A) $6,800 B) $9,000 C) $9,800 D) $11,800 A) $6,800 B) $9,000 C) $9,800 D) $11,800

Theele Corporation Theele Corporation has the following information for April, May, and June: $\begin{array}{llll}&\text { April}&\text { May}&\text { June }\\ \text { Units produced } & 10,000 & 10,000 & 10,000 \\ \text { Units sold } & 7,000 & 8,500 & 10,500 \end{array}$ Production costs per unit (based on 10,000 units) are as follows: \[\begin{array} { l l } \text { Direct materials } & \$ 13 \\ \text { Direct labour } & 9 \\ \text { Variable manufacturing overhead } & 7 \\ \text { Fixed manufacturing overhead } & 5 \\ \text { Variable selling and administrative expenses } & 10 \\ \text { Fixed selling and administrative expenses } & 4 \end{array}\] The company had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months. -Refer to Theele Corporation. What is the May contribution margin using the variable costing method?

A) $136,000 B) $170,000 C) $204,000 D) $240,000 A) $136,000 B) $170,000 C) $204,000 D) $240,000

Exam 8: Absorption and Variable Costing, and Inventory Management

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 variable costing method?

(Multiple Choice)

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Question 81

What is characteristic of the economic order quantity (EOQ)?

(Multiple Choice)

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Question 82

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. -Variable selling expense

(Multiple Choice)

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Question 83

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 Administrative expense

(Multiple Choice)

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Question 84

Raymond Company Raymond Company reported the following units of production and sales for June and July: Units Units Month Produced Sold June 100,000 90,000 July 100,000 105,000 Net income using the absorption costing method for June was $40,000; net income using the variable costing method for July was $50,000. Fixed manufacturing costs were $600,000 for each month. -Refer to Raymond Company. What was the net income for July using the absorption costing method?

(Multiple Choice)

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Question 85

If the demand for a product is known, total inventory-related costs consist of ordering costs and carrying costs.

(True/False)

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Question 86

All other things being equal, if the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income.

(True/False)

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Question 87

Match each of the following descriptions with the correct term from the items listed below. -Carrying costs

(Multiple Choice)

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Question 88

Match each of the following descriptions with the correct term from the items listed below. -Ordering costs

(Multiple Choice)

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Question 89

Segment sales revenue minus which of the following sets of costs is equal to segment margin?

(Multiple Choice)

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Question 90

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. -Direct labour for units sold

(Multiple Choice)

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Question 91

Which of the following reflects the primary difference between variable and absorption costing?

(Multiple Choice)

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Question 92

Nute Corporation The following information pertains to Nute Corporation (the per unit amounts apply to all years): Beginning inventory 1,000 units Ending Finished Goods Inventory 6,000 units Direct labour per unit \ 40 Direct materials per unit 20 Variable manufacturing overhead per unit 10 Fixed manufacturing overhead per unit 30 Variable selling and administrative costs per unit 6 Fixed selling and administrative costs per unit 14 -Refer to Nute Corporation. What is the relationship between absorption costing net income and variable costing net income?

(Multiple Choice)

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Question 93

Which statement best reflects the relationship between absorption costing net income and variable costing net income?

(Multiple Choice)

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Question 94

Match each of the following descriptions with the correct term from the items listed below. -Stockout costs

(Multiple Choice)

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Question 95

Explain the difference between absorption costing income and variable costing income.

(Essay)

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Question 96

Ella Company Last year, Ella Company produced 10,000 units and sold 9,000 units at a sales price of $9 per unit. Costs for last year were as follows: Direct materials \ 10,000 Direct labour 15,000 Variable manufacturing overhead 5,000 Fixed manufacturing overhead 20,000 Variable selling expense 7,200 Fixed selling expense 5,000 Fixed administrative expense 12,000 Fixed manufacturing overhead is applied on the basis of expected production. Last year, the company expected to produce 10,000 units.The company had no beginning inventories. -Refer to Ella Company. What is the operating income using the variable costing method?

(Multiple Choice)

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Question 97

Which type of cost reflects the ordering costs when the economic order quantity (EOQ) model is applied to units produced within the company?

(Multiple Choice)

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Question 98

Theele Corporation Theele Corporation has the following information for April, May, and June: April May June Units produced 10,000 10,000 10,000 Units sold 7,000 8,500 10,500 Production costs per unit (based on 10,000 units) are as follows: Direct materials \ 13 Direct labour 9 Variable manufacturing overhead 7 Fixed manufacturing overhead 5 Variable selling and administrative expenses 10 Fixed selling and administrative expenses 4 The company had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months. -Refer to Theele Corporation. What is the May contribution margin using the variable costing method?

(Multiple Choice)

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Question 99

JIT relies on a push system to control Finished Goods Inventory.

(True/False)

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Question 100

What is characteristic of the economic order quantity (EOQ)?

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. -Variable selling expense

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 Administrative expense

If the demand for a product is known, total inventory-related costs consist of ordering costs and carrying costs.

All other things being equal, if the number of units produced in a period is smaller than the number of units sold in period, absorption costing income will be higher than variable costing income.

Match each of the following descriptions with the correct term from the items listed below. -Carrying costs

Match each of the following descriptions with the correct term from the items listed below. -Ordering costs

Segment sales revenue minus which of the following sets of costs is equal to segment margin?

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. -Direct labour for units sold

Which of the following reflects the primary difference between variable and absorption costing?

Which statement best reflects the relationship between absorption costing net income and variable costing net income?

Match each of the following descriptions with the correct term from the items listed below. -Stockout costs

Explain the difference between absorption costing income and variable costing income.

Which type of cost reflects the ordering costs when the economic order quantity (EOQ) model is applied to units produced within the company?

JIT relies on a push system to control Finished Goods Inventory.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Activity-Based Costing and Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

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