Exam 20: Variable Costing for Management Analysis

For a period during which the quantity of product manufactured was less than the quantity sold,income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

In which of the following types of firms would it be appropriate to prepare contribution margin reporting and analysis?

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

Contribution margin reporting can be beneficial for analyzing which of the following?

Under absorption costing,the cost of finished goods includes direct materials,direct labor,and all factory overhead.

Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption costing concept.

For a period during which the quantity of product manufactured equals the quantity sold,income from operations reported under absorption costing will equal the income from operations reported under variable costing.

On what effects does contribution margin analysis focus?

In variable costing,fixed costs do not become part of the cost of goods manufactured,but are considered an expense of the period.

Fixed costs are $50 per unit and variable costs are $125 per unit.Production was 130,000 units,while sales were 125,000 units.Determine (a)whether variable costing income from operations is less than or greater than absorption costing income from operations,and (b)the difference in variable costing and absorption costing income from operations.

For a period during which the quantity of product manufactured was less than the quantity sold,income from operations reported under absorption costing will be larger than income from operations reported under variable costing.