Exam 9: Inventory Costing and Capacity Analysis

Patota Manufacturing incurred the following expenses during 2017: Fixed manufacturing costs \ 120,000 Fixed nonmanufacturing costs \ 83,000 Unit selling price \ 340 Total unit cost \ 120 Variable manufacturing cost rate \ 60 Units produced 1,390 units What is the breakeven point in units using absorption costing if the units produced are actually 2,220? (Round your final answer up to the next whole unit. )

The only real challenge in planning and controlling capacity costs is with the denominator as the numerator of a budgeted fixed manufacturing cost allocation rate is rarely the issue.

Explain how using master-budget capacity utilization for setting prices can lead to a downward demand spiral.

Ireland Corporation planned to be in operation for three years. Required: a.Prepare an income statement for each year using absorption costing. b.Prepare an income statement for each year using variable costing.

Which of the following statements is true of contribution-margin format of the income statement?

For benchmarking purposes for long-range planning,it is best to use master-budget capacity because all competitors use about the same about of capacity for production.

Swan Textiles Inc.produces and sells a decorative pillow for $98.00 per unit.In the first month of operation,2,300 units were produced and 1,800 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes: Variable manufacturing costs \ 23.00 per unit Variable marketing costs \ 6.00 per unit Fixed manufacturing costs \ 15 per unit Administrative expenses, all fixed \ 21.00 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 500 units What is the contribution margin using variable costing?

What is throughput costing? What advantages does it have over variable and absorption costing?

Hyland Resources Inc.uses practical capacity as the denominator to set the cost of supplying capacity and for the current period the budgeted cost per unit of supplying capacity was $44.Practical capacity was set at 14,000 units with theoretical capacity at 20,000 units.During the period,only 11,000 units were produced while the master budget assumed that the company would produce 13,000 units.What is value of the manufacturing resources not used during the period?

To reduce the undesirable incentives to build up inventories that absorption costing can create,a number of companies use variable costing for internal reporting.

Which of the following capacity levels should a company choose,from a long-run product costing perspective,to allocate budgeted fixed manufacturing costs to products?

In ________,fixed manufacturing costs are included as inventoriable costs.

Kaiser Company just hired its fourth production manager in three years.All three previous managers had quit because they could not get the company above the break-even point,even though sales had increased somewhat each year.The company was operating at about 60 % of plant capacity.The flatware industry was growing,so increased sales were not out of the question. I.R.Thinking took the job as manager of the production division with a very attractive salary package.After interviewing for the position,he proposed a salary and bonus package that would give him a very small salary but a large bonus if he took the operating income (using absorption costing)above the breakeven point during his very first year. Required: What do you think Mr.Thinking had in mind for increasing the company's operating income?

In planning and control of capacity costs,managers must consider possible capacity measures.Which of the following measures the available supply of capacity in a factory?

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.

Jenkins Corporation sells one product.The following information is available for the current month: Selling price per unit \ 110 Standard fixed manufacturing costs per unit \ 49 Variable selling and administrative costs per unit \ B Standard variable manufacturing costs per unit \ 3 Fixed selling and administrative costs \ 44,000 Wnits produced 14,800 units Units sold 9,600 units What is the variable costing breakeven point in units? (Round your final answer up to the next whole unit. )

Yellow Mountain Manufacturing factors practical capacity as a denominator to calculate budgeted fixed overhead.Theoretical capacity is 12,000 units per year with practical capacity of 9,000 units per year.Budgeted fixed overhead costs were $690,000 and actual overhead costs were $730,000 with actual output of 8,000 units.Which of the following statements is true?

Absorption costing is also referred to as super-variable costing.

The production-volume variance,which relates only to fixed manufacturing overhead,exists under absorption costing but not under variable costing.

Fast Track Auto produces and sells an auto part for $60 per unit.In 2017,120,000 parts were produced and 75,000 units were sold.Other information for the year includes: What is the inventoriable cost per unit using variable costing?