Exam 8: Variable Costing and the Costs of Quality and Sustainability

Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow. Planned production in units 10,000 Actual production in units 10,000 Number of units sold 8,500 There were no variances. The income (loss) under variable costing is:

Delaware has computed the following unit costs for the year just ended: Variable manufacturing overhead 85 Fixed manufacturing overhead 20 Variable selling and administrative cost 18 Fixed selling and administrative cost 11 Which of the following choices correctly depicts the per-unit cost of inventory under variable costing and absorption costing?

Roberts Corp., which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 37,000 units at $15 per unit Production costs: Variable: $4 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The contribution margin that the company would disclose on a variable-costing income statement is:

Indiana Company incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: Direct material used \ 280,000 Direct labor 120,000 Variable manufacturing overhead 160,000 Fixed manufacturing overhead 100,000 Variable selling and administrative cost 60,000 Fixed selling and administrative cost 90,000 If Indiana uses absorption costing, the total inventoriable costs for the year would be:

Which of the following is not a type of quality cost?

Roberts Corp., which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 37,000 units at $15 per unit Production costs: Variable: $4 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The gross margin that the company would disclose on an absorption-costing income statement is:

Roma Corporation has computed the following unit costs for the year just ended: Direct material used \ 11 Direct labor 17 Variable manufacturing overhead 21 Fixed manufacturing overhead 23 Variable selling and administrative cost 5 Fixed selling and administrative cost 27 Under variable costing, each unit of the company's inventory would be carried at:

Information taken from Giles Corporation's May accounting records follows. Direct materials used \ 150,000 Direct labor 80,000 Variable manufacturing overhead 30,000 Fixed manufacturing overhead 100,000 Variable selling and administrative costs 51,000 Fixed selling and administrative costs 60,000 Sales revenues 625,000 Required: A. Assuming the use of variable costing, compute the inventoriable costs for the month. B. Compute the month's inventoriable costs by using absorption costing. C. Assume that anticipated and actual production totaled 20,000 units, and that 18,000 units were sold during May. Determine the amount of fixed manufacturing overhead and fixed selling and administrative costs that would be expensed for the month under (1) variable costing and (2) absorption costing. D. Assume the same data as in requirement "C." Compute the contribution margin that would be reported on a variable-costing income statement.

Variable manufacturing overhead becomes part of a unit's cost when variable costing is used.

Which of the following statements pertain to variable costing?

Indiana Company incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: Direct material used \ 280,000 Direct labor 120,000 Variable manufacturing overhead 160,000 Fixed manufacturing overhead 100,000 Variable selling and administrative cost 60,000 Fixed selling and administrative cost 90,000 Indiana's per-unit inventoriable cost under absorption costing is:

The table that follows denotes selected characteristics of absorption costing and/or variable costing. Changes to grid above: Lower income when inventories rise (NOT "net" income) External financial statement USE (NOT "users") Required: Evaluate each product-cost, period-cost, and income-statement/disclosure characteristic and determine whether it relates to absorption costing, variable costing, or both methods. Place an "X" in the proper column.

Fixed manufacturing overhead is not inventoried under absorption costing.

McArthur Corp., which began business at the start of the current year, had the following data: Planned and actual production: 40,000 units Sales: 38,000 units at $15 per unit Production costs: Variable: $5 per unit Fixed: $260,000 Selling and administrative costs: Variable: $1 per unit Fixed: $32,000 The contribution margin that the company would disclose on a variable-costing income statement is:

Franz began business at the start of this year and had the following costs: variable manufacturing cost per unit, $9; fixed manufacturing costs, $60,000; variable selling and administrative costs per unit, $2; and fixed selling and administrative costs, $220,000. The company sells its units for $45 each. Additional data follow. Planned production in units 10,000 Actual production in units 10,000 Number of units sold 8,500 There were no variances. Income reported under absorption costing and variable costing is:

Springer began business at the start of the current year. The company planned to produce 40,000 units, and actual production conformed to expectations. Sales totaled 37,000 units at $42 each. Costs incurred were: Variable manufacturing overhead per unit \ 19 Fixed manufacturing overhead 240,000 Variable selling and administrative cost per unit 7 Fixed selling and administrative cost per unit 140,000 If there were no variances, the company's absorption-costing income would be:

Lone Star has computed the following unit costs for the year just ended: Direct material used \ 12 Direct labor 18 Variable manufacturing overhead 25 Fixed manufacturing overhead 29 Variable selling and administrative cost 10 Fixed selling and administrative cost 17 Under variable costing, each unit of the company's inventory would be carried at:

Which of the following formulas can often reconcile the difference between absorption- and variable-costing income?

Kim, Inc. began business at the start of the current year and maintains its accounting records on an absorption-cost basis. The following selected information appeared on the company's income statement and end-of-year balance sheet: Income-statement data: Sales revenues (35,000 units \times\ 22) \ 770,000 Gross margin 210,000 Total sales and administrative expenses 160,000 lance-sheet data: Ending finished-goods inventory (12,000 units) 192,000 Kim achieved its planned production level for the year. The company's fixed manufacturing overhead totaled $141,000, and the firm paid a 10% commission based on gross sales dollars to its sales force. Required: A. How many units did Kim plan to produce during the year? B. How much fixed manufacturing overhead did the company apply to each unit produced? C. Compute Kim's cost of goods sold. D. How much variable cost did the company attach to each unit manufactured?

Which of the following statements pertain to both variable costing and absorption costing?