Exam 20: Variable Costing for Management Analysis

The factory superintendent's salary would be included as part of the cost of products manufactured under the variable costing concept.

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the unit cost factor on the change in variable cost of goods sold is:

In contribution margin analysis, the quantity factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled $799,500 (78,000 units at $10.25 each), the effect of the unit price factor on the change in sales is:

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement?

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.

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Management may use both absorption and variable costing methods for analyzing a particular product.

On the variable costing income statement, variable costs are deducted from contribution margin to yield manufacturing margin.

In the absorption costing income statement, deduction of the cost of goods sold from sales yields gross profit.

The beginning inventory is 10,000 units. All of the units manufactured during the period and 8,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and variable costs are $300 per unit. 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 income from operations.

In evaluating the performance of salespersons, the salesperson with the highest level of sales should be evaluated as the best performer.

In contribution margin analysis, the unit price or unit cost factor is computed as:

Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because

For a period during which the quantity of inventory at the end equals the inventory at the beginning, income from operations reported under variable costing will equal income from operations reported under absorption costing.

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.

Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.

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

Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?