Question 1

Which of the following statements is correct using the direct costing concept?

Accepted Answer

A)  All manufacturing costs are included in the calculation of cost of goods manufactured. 
B)  Only fixed costs are included in the calculation of cost of goods manufactured while variable costs are considered period costs. 
C)  Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs. 
D)  All manufacturing costs are considered period costs. 
A)  All manufacturing costs are included in the calculation of cost of goods manufactured. 
B)  Only fixed costs are included in the calculation of cost of goods manufactured while variable costs are considered period costs. 
C)  Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs. 
D)  All manufacturing costs are considered period costs.

Question 2

A business operated at 100% of capacity during its first month, with the following results:   What is the amount of the gross profit that would be reported on the absorption costing income statement?

Accepted Answer

A)  $21,000 
B)  $18,900 
C)  $27,900 
D)  $18,000 
A)  $21,000 
B)  $18,900 
C)  $27,900 
D)  $18,000

Question 3

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 quantity factor on the change in variable cost of goods sold is:

Accepted Answer

A)  $5,000 decrease 
B)  $5,000 increase 
C)  $5750 increase 
D)  $5,750 decrease 
A)  $5,000 decrease 
B)  $5,000 increase 
C)  $5750 increase 
D)  $5,750 decrease

Question 4

A change in the amount of sales can be due to either a change in the units sold or a change in price or both.

Accepted Answer

A) True 
 B)False

Question 5

Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory.

Accepted Answer

A) True 
 B)False

Question 6

A business operated at 100% of capacity during its first month, with the following results:   What is the amount of the income from operations that would be reported on the absorption costing income statement?

Accepted Answer

A)  $21,000 
B)  $18,900 
C)  $18,200 
D)  $27,900 
A)  $21,000 
B)  $18,900 
C)  $18,200 
D)  $27,900

Question 7

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold 
A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold

Question 9

If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is the manufacturing cost per unit if:
(a) 20,000 units are manufactured and the company uses the variable costing concept?
(b) 25,000 units are manufactured and the company uses the variable costing concept?
(c) 20,000 units are manufactured and the company uses the absorption costing concept?
(d) 25,000 units are manufactured and the company used the absorption costing concept?

Accepted Answer

(a) $15 (variable cost only)
(

Question 10

The Excelsior Company has three salespersons. Average sales price per unit sold, average variable manufacturing costs per unit, and number of units sold for each salesperson is shown below.
Commissions are according to the following schedule:
     Prepare a contribution by salesperson report.

Accepted Answer

The answer of The Excelsior Company has three salespersons. Average...

Question 11

The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available:   What would be the effect on income from operations if absorption costing is used rather than variable costing?

Accepted Answer

A)  $44,000 decrease 
B)  $44,000 increase 
C)  $64,000 increase 
D)  $64,000 decrease 
A)  $44,000 decrease 
B)  $44,000 increase 
C)  $64,000 increase 
D)  $64,000 decrease

Question 12

If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the change in variable cost of goods sold is:

Accepted Answer

A)  $10,800 decrease 
B)  $10,800 increase 
C)  $10,000 increase 
D)  $10,000 decrease 
A)  $10,800 decrease 
B)  $10,800 increase 
C)  $10,000 increase 
D)  $10,000 decrease

Question 13

If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is profitable to increase the sales of that product with the lowest contribution margin.

Accepted Answer

A) True 
 B)False

Question 14

Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.

Accepted Answer

A) True 
 B)False

Question 15

Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis report for the year ended December 31, 2012.

Accepted Answer

The answer of Based upon the following data taken from...

Question 16

Which of the following is(are) reason(s) for easy identification and control of variable manufacturing costs under the variable costing method?

Accepted Answer

A)  variable and fixed costs are reported separately. 
B)  variable costs can be controlled by the operating management. 
C)  fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. 
D)  All of the above are true. 
A)  variable and fixed costs are reported separately. 
B)  variable costs can be controlled by the operating management. 
C)  fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. 
D)  All of the above are true.

Question 17

Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales were 12,000 units. Determine (a) whether variable cost 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.

Accepted Answer

The answer of Fixed costs are $10 per unit and...

Question 18

On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing:
  
 If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement using variable costing.

Accepted Answer

@#IMG-DLM& Computations:
Variable cost o

Question 19

For a period during which the quantity of inventory at the end was smaller than that at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 20

Contribution margin reporting and analysis is appropriate only for manufacturing firms, not for service firms.

Accepted Answer

A) True 
 B)False

Exam 20: Variable Costing for Management Analysis

Which of the following statements is correct using the direct costing concept?

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the gross profit that would be reported on the absorption costing income statement?

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 quantity factor on the change in variable cost of goods sold is:

A change in the amount of sales can be due to either a change in the units sold or a change in price or both.

Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory.

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the income from operations that would be reported on the absorption costing income statement?

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

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

The Excelsior Company has three salespersons. Average sales price per unit sold, average variable manufacturing costs per unit, and number of units sold for each salesperson is shown below. Commissions are according to the following schedule: Prepare a contribution by salesperson report.

The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the change in variable cost of goods sold is:

If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is profitable to increase the sales of that product with the lowest contribution margin.

Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.

Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis report for the year ended December 31, 2012.

Which of the following is(are) reason(s) for easy identification and control of variable manufacturing costs under the variable costing method?

For a period during which the quantity of inventory at the end was smaller than that at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Contribution margin reporting and analysis is appropriate only for manufacturing firms, not for service firms.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

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