Question 1

Which of the following best describes how fixed cost are treated in a variable cost method?

Accepted Answer

A) They are part of the product cost 
B) They are excluded from inventory cost and are treated as period costs 
C) They are allocated to the product cost using a denominator-level capacity choice 
D) They are classified as nonmanufacturing costs 
A) They are part of the product cost 
B) They are excluded from inventory cost and are treated as period costs 
C) They are allocated to the product cost using a denominator-level capacity choice 
D) They are classified as nonmanufacturing costs

Question 2

Charlassier Corporation manufactures and sells laptop computers and uses standard costing.For the month of September there was no beginning inventory,there were 3,000 units produced and 2,500 units sold.The manufacturing variable cost per unit is $385 and the variable operating cost per unit was $312.50.The fixed manufacturing cost is $450,000 and the fixed operating cost is $75,000.The selling price per unit is $925.
Required:
Prepare the income statement for Charlassier Corporation for September under variable costing.

Accepted Answer

a.Absorption costing includes both fixed

Question 3

Jean Peck's Furniture manufactures tables for hospitality sector.It takes only bulk orders and each table is sold for $500 after negotiations.In the month of January,it manufactures 3,100 tables and sells 2,700 tables.Actual fixed costs are the same as the amount of fixed costs budgeted for the month.
The following information is provided for the month of January:
$$\begin{array} { l l } 
\text { Variable manufarturing costs } & \$ 130 \text { per unit } \
\text { Fixed manufacturing costs } & \$105,000 \text { per month } \
\text { Fixed Administrative expenses } & \$ 30,000 \text { per month }
\end{array}$$
At the end of the month Jean Peck's Furniture has an ending inventory of finished goods of 400 units.The company also incurs a sales commission of $13 per unit.
What is the gross margin when using absorption costing? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar. )

Accepted Answer

A) $958,700 
B) $1,179,900 
C) $842,003 
D) $907,551 
A) $958,700 
B) $1,179,900 
C) $842,003 
D) $907,551

Question 4

Which of the following is true of normal capacity utilization?

Accepted Answer

A) It will almost always show results that are very close to that of practical capacity utilization 
B) It can result in setting selling prices that are not competitive. 
C) It results in the lowest cost estimate of the four capacity options when used for product costing. 
D) It is also called master-budget capacity utilization 
A) It will almost always show results that are very close to that of practical capacity utilization 
B) It can result in setting selling prices that are not competitive. 
C) It results in the lowest cost estimate of the four capacity options when used for product costing. 
D) It is also called master-budget capacity utilization

Question 5

Which of the following best describes practical capacity?

Accepted Answer

A) It is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions,such as scheduled maintenance time and shutdowns for holidays. 
B) It is the level of capacity based on producing at full efficiency all the time. 
C) It is the level of capacity utilization that satisfies average customer demand over a period that includes seasonal,cyclical,and trend factors. 
D) It is the level of capacity utilization that managers expect for the current budget period,which is typically one year. 
A) It is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions,such as scheduled maintenance time and shutdowns for holidays. 
B) It is the level of capacity based on producing at full efficiency all the time. 
C) It is the level of capacity utilization that satisfies average customer demand over a period that includes seasonal,cyclical,and trend factors. 
D) It is the level of capacity utilization that managers expect for the current budget period,which is typically one year.

Question 6

Which of the following costs is inventoried when using absorption costing?

Accepted Answer

A) variable selling costs 
B) fixed administrative costs 
C) variable manufacturing costs 
D) fixed selling costs 
A) variable selling costs 
B) fixed administrative costs 
C) variable manufacturing costs 
D) fixed selling costs

Question 7

Briefly explain why many companies use absorption costing for external reporting as well as internal accounting.

Accepted Answer

Absorption costing is the requ

Question 8

The following data are available for Brennan Soft Toys Company for the year ended September 30,2017.
   
Manufacturing costs incurred:
   
Nonmanufacturing costs incurred:
   
Required:
a.Determine operating income using the variable-costing approach.
b.Determine operating income using the absorption-costing approach.
c.Explain why operating income is not the same under the two approaches.

Accepted Answer

a.Sales = 24,000 × $50 = $1,200,000
 @#IMG-DLM&_TB

Question 9

Variable costing is also called direct costing because it considers other nonmanufacturing direct costs,such as direct marketing costs as inventoriable costs.

Accepted Answer

A) True 
 B)False

Question 10

When production is greater than sales,operating income under variable costing will be less than what it would be under absorption costing.

Accepted Answer

A) True 
 B)False

Question 11

The budgeted fixed manufacturing cost rate is the lowest for ________.

Accepted Answer

A) practical capacity 
B) theoretical capacity 
C) master-budget capacity utilization 
D) normal capacity utilization 
A) practical capacity 
B) theoretical capacity 
C) master-budget capacity utilization 
D) normal capacity utilization

Question 12

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

Accepted Answer

A) True 
 B)False

Question 13

Soul Socket Inc.manufactures socket wrenches.
   
Required:
a.What is the theoretical fixed manufacturing overhead rate per wrench for the next month?
b.What is the practical fixed manufacturing overhead rate per wrench for the next month?
c.What is the normal fixed manufacturing overhead rate per wrench for the next month?
d.What is the master-budget fixed manufacturing overhead rate per wrench for the next month?

Accepted Answer

a.Theoretical overhead rate = $374,000 /

Question 14

Which of the following capacity levels do proponents of activity-based costing recommend to be used as the denominator level to calculate activity cost rates?

Accepted Answer

A) practical capacity 
B) normal capacity utilization 
C) theoretical capacity 
D) master-budget capacity utilization 
A) practical capacity 
B) normal capacity utilization 
C) theoretical capacity 
D) master-budget capacity utilization

Question 15

Engineering and human resource factors are both important when estimating theoretical or practical capacity.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following approaches spreads underallocated or overallocated overhead among ending balances in Work-in-Process Control,Finished Goods Control,and Cost of Goods Sold?

Accepted Answer

A) the adjusted allocation-rate approach 
B) the proration approach 
C) the write-off variances to cost of goods sold approach 
D) the reinstatement approach 
A) the adjusted allocation-rate approach 
B) the proration approach 
C) the write-off variances to cost of goods sold approach 
D) the reinstatement approach

Question 17

The production-volume variance only exists under variable costing and not under absorption costing.

Accepted Answer

A) True 
 B)False

Question 18

Francis Corporation is having trouble selling its inventory because of its ongoing dispute with its logistical partner.The company was not able to sell any inventory in the month of January because of the dispute.It manufactured 8,000 units in January.Francis had no other fixed costs commitment other than fixed manufacturing costs of $100,000.It follows absorption costing.If actual production in January was equal to the denominator level,what is the amount of sales required to attain breakeven point?

Accepted Answer

A) 1250 units 
B) 125 units 
C) 10 units 
D) 0 units 
A) 1250 units 
B) 125 units 
C) 10 units 
D) 0 units

Question 19

Absorption costing helps managers to artificially inflate profits by encouraging the production of products that absorb the highest amount of fixed manufacturing costs.

Accepted Answer

A) True 
 B)False

Question 20

Throughput margin equals revenues minus all product costs.

Accepted Answer

A) True 
 B)False

Which of the following best describes how fixed cost are treated in a variable cost method?

Which of the following is true of normal capacity utilization?

Which of the following best describes practical capacity?

Which of the following costs is inventoried when using absorption costing?

Briefly explain why many companies use absorption costing for external reporting as well as internal accounting.

Variable costing is also called direct costing because it considers other nonmanufacturing direct costs,such as direct marketing costs as inventoriable costs.

When production is greater than sales,operating income under variable costing will be less than what it would be under absorption costing.

The budgeted fixed manufacturing cost rate is the lowest for ________.

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

Which of the following capacity levels do proponents of activity-based costing recommend to be used as the denominator level to calculate activity cost rates?

Engineering and human resource factors are both important when estimating theoretical or practical capacity.

Which of the following approaches spreads underallocated or overallocated overhead among ending balances in Work-in-Process Control,Finished Goods Control,and Cost of Goods Sold?

The production-volume variance only exists under variable costing and not under absorption costing.

Absorption costing helps managers to artificially inflate profits by encouraging the production of products that absorb the highest amount of fixed manufacturing costs.

Throughput margin equals revenues minus all product costs.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets,direct-Cost Variances,and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy,balanced Scorecard,and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 9: Inventory Costing and Capacity Analysis

Which of the following best describes how fixed cost are treated in a variable cost method?

Which of the following is true of normal capacity utilization?

Which of the following best describes practical capacity?

Which of the following costs is inventoried when using absorption costing?

Briefly explain why many companies use absorption costing for external reporting as well as internal accounting.

Variable costing is also called direct costing because it considers other nonmanufacturing direct costs,such as direct marketing costs as inventoriable costs.

When production is greater than sales,operating income under variable costing will be less than what it would be under absorption costing.

The budgeted fixed manufacturing cost rate is the lowest for ________.

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity.

Which of the following capacity levels do proponents of activity-based costing recommend to be used as the denominator level to calculate activity cost rates?

Engineering and human resource factors are both important when estimating theoretical or practical capacity.

Which of the following approaches spreads underallocated or overallocated overhead among ending balances in Work-in-Process Control,Finished Goods Control,and Cost of Goods Sold?

The production-volume variance only exists under variable costing and not under absorption costing.

Absorption costing helps managers to artificially inflate profits by encouraging the production of products that absorb the highest amount of fixed manufacturing costs.

Throughput margin equals revenues minus all product costs.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets,direct-Cost Variances,and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy,balanced Scorecard,and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters