Exam 5: Variable Costing for Management Analysis

Management will use both variable and absorption costing in all of the following activities except:

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?

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

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

Variable costing is also known as direct costing.

Management should focus its sales and production efforts on the product or products that will provide

In variable costing, the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.

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

Sales mix is generally defined as the relative distribution of sales among the various products sold.

On the variable costing income statement, variable selling and administrative expenses are deducted from manufacturing margin to yield contribution margin.

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.

On October 31, the end of the first month of operations, Morristown & Co. prepared the following income statement based on absorption costing:

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.

On the variable costing income statement, the figure representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.