Exam 19: Variable Costing and Performance Reporting

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

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

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

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Sales less variable costs equals manufacturing margin.

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

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Contribution margin divided by sales equals contribution margin ratio.

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

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

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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.

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

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

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

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

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

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

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