Exam 5: Variable Costing for Management Analysis

The level of inventory of a manufactured product has increased by 5,000 units during a period. The following data are also available: What would be the effect on income from operations if variable costing is used rather than absorption costing?

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 exceeded the quantity sold, income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

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, what is the amount of inventory that would be reported on the absorption costing balance sheet?

Costs that can be influenced by management at a specific level of management are called:

Under variable costing, which of the following costs would not be included in finished goods inventory?

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 is the amount of the contribution margin that would be reported on the variable costing income statement?

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.

The beginning inventory is 5,000 units. All of the units manufactured during the period and 3,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $25 per unit, and variable costs are $55 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.

Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

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?

Which of the following is not true when determining the selling price for a product?

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?

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

The contribution margin ratio is computed as:

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:

Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affects the amount of income from operations reported under absorption costing.

In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales price or unit cost, is referred to as the:

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

In the long run, for a business to remain in operation, the selling price of a product should normally cover all costs and expenses and provide a reasonable income.