Exam 19: Variable Costing and Performance Reporting

How can the use of absorption costing result in over production?

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

A variable costing income statement focuses attention on the relationship between costs and sales that is not evident from the absorption costing format.

Sales less variable costs equals manufacturing margin.

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared under absorption costing.

Contribution margin divided by sales equals contribution margin ratio.

What are the benefits of using variable costing when striving to control costs? Are these benefits available under absorption costing?

_______________________ is the amount remaining from sales revenues after all variable expenses have been deducted.

Materials Corporation sold 12,000 units of its product at a price of $67 per unit. Total variable cost per unit is $54.94, consisting of $45.05 in variable production cost and $9.89 in variable selling and administrative cost. Compute the contribution margin for the company.

Reported income is identical under absorption costing and variable costing when the units produced _______________ the units sold.

When units produced are less than units sold, income under absorption costing is higher than income under variable costing.

________________________ is a costing method that includes all manufacturing costs in unit product costs.

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.

When units produced exceed the units sold, income under absorption costing is higher than income under variable costing.

Cost information from both absorption costing and variable costing can aid managers in pricing.