Question 1

Net operating income is not affected by changes in production when absorption costing is used.

Accepted Answer

A) True 
 B)False

Question 2

Dewiel Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years:  
-What was the absorption costing net operating income last year?

Accepted Answer

A)  $90,900 
B)  $96,900 
C)  $84,900 
D)  $92,100 
A)  $90,900 
B)  $96,900 
C)  $84,900 
D)  $92,100

Question 3

Gallager Company, which has only one product, has provided the following data concerning its most recent month of operations:  
-The total gross margin for the month under the absorption costing approach is:

Accepted Answer

A)  $303,600 
B)  $132,000 
C)  $19,800 
D)  $148,600 
A)  $303,600 
B)  $132,000 
C)  $19,800 
D)  $148,600

Question 4

Weber Company computes net operating income under both the absorption costing approach and the variable costing approach. For a given year the absorption costing net operating income was greater than the variable costing net operating income. This fact suggests that:

Accepted Answer

A)  variable manufacturing costs were less than fixed manufacturing costs. 
B)  more units were produced during the year than were sold. 
C)  more units were sold during the year than were produced. 
D)  common costs were greater than variable costs for the year. 
A)  variable manufacturing costs were less than fixed manufacturing costs. 
B)  more units were produced during the year than were sold. 
C)  more units were sold during the year than were produced. 
D)  common costs were greater than variable costs for the year.

Question 5

Kidwell Company, which has only one product, has provided the following data concerning its most recent month of operations: The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. 107. What is the net operating income for the month under variable costing? A. $5,800 B. $5,400 C. $8,300 D. $16,000 -What is the net operating income for the month under absorption costing?

Accepted Answer

A)  $5,800 
B)  $16,000 
C)  $5,400 
D)  $8,300 
A)  $5,800 
B)  $16,000 
C)  $5,400 
D)  $8,300

Question 6

Baylor Inc., which produces a single product, has provided the following data for its most recent month of operations:  
There were no beginning or ending inventories. The variable costing unit product cost was:

Accepted Answer

A)  $91 
B)  $67 
C)  $69 
D)  $61 
A)  $91 
B)  $67 
C)  $69 
D)  $61

Question 7

Faxon Company, which has only one product, has provided the following data concerning its most recent month of operations:  
-What is the net operating income for the month under absorption costing?

Accepted Answer

A)  $11,600 
B)  $2,300 
C)  $(600) 
D)  $9,300 
A)  $11,600 
B)  $2,300 
C)  $(600) 
D)  $9,300

Question 8

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations:  
-What is the total period cost for the month under the absorption costing approach?

Accepted Answer

A)  $32,500 
B)  $71,500 
C)  $302,500 
D)  $231,000 
A)  $32,500 
B)  $71,500 
C)  $302,500 
D)  $231,000

Question 9

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations:  
-What is the unit product cost for the month under variable costing?

Accepted Answer

A)  $73 
B)  $44 
C)  $79 
D)  $38 
A)  $73 
B)  $44 
C)  $79 
D)  $38

Question 10

Walsh Company produces a single product. Last year, the company manufactured 25,000 units and sold 22,000 units. Production costs were as follows:   Sales totaled $440,000, variable selling and administrative expenses were $110,000, and fixed selling and administrative expenses were $45,000. There was no beginning inventory. Assume that direct labor is a variable cost.
-The net operating income under absorption costing would be:

Accepted Answer

A)  $9,000 
B)  $12,000 
C)  $2,000 
D)  $21,000 
A)  $9,000 
B)  $12,000 
C)  $2,000 
D)  $21,000

Question 11

During its first year of operations, Holt Manufacturing Company incurred the following costs to produce 200,000 units of its only product:   Holt also incurred the following costs in the sale of 180,000 units of product during its first year:   Assume that direct labor is a variable cost.
-If Holt's variable costing net operating income for this first year is $397,800, what would its absorption costing net operating income be for this first year?

Accepted Answer

A)  $354,600 
B)  $441,000 
C)  $445,800 
D)  $473,800 
A)  $354,600 
B)  $441,000 
C)  $445,800 
D)  $473,800

Question 12

Which of the following costs at a manufacturing company would be treated as a product cost under the absorption costing method?

Accepted Answer

A)  sales commissions 
B)  fire insurance cost on factory building 
C)  advertising costs 
D)  All of these 
A)  sales commissions 
B)  fire insurance cost on factory building 
C)  advertising costs 
D)  All of these

Question 13

During its first year of operations, Holt Manufacturing Company incurred the following costs to produce 200,000 units of its only product:   Holt also incurred the following costs in the sale of 180,000 units of product during its first year:   Assume that direct labor is a variable cost.
-What would be the cost per unit of Holt's finished goods inventory at the end of the first year of operations under the absorption costing method?

Accepted Answer

A)  $2.34 
B)  $2.74 
C)  $4.50 
D)  $6.30 
A)  $2.34 
B)  $2.74 
C)  $4.50 
D)  $6.30

Question 14

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:  
The total gross margin for the month under absorption costing is:

Accepted Answer

A)  $163,800 
B)  $7,800 
C)  $170,800 
D)  $312,000 
A)  $163,800 
B)  $7,800 
C)  $170,800 
D)  $312,000

Question 15

The costs assigned to units in inventory are typically lower under absorption costing than under variable costing.

Accepted Answer

A) True 
 B)False

Question 16

Last year, Gransky Corporation's variable costing net operating income was $52,100 and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year?

Accepted Answer

A)  $52,100 
B)  $2,800 
C)  $54,900 
D)  $49,300 
A)  $52,100 
B)  $2,800 
C)  $54,900 
D)  $49,300

Question 17

Last year, Jaquet Corporation's variable costing net operating income was $58,000. The fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $9,000.
Required:
Determine the absorption costing net operating income last year. Show your work!

Accepted Answer

The answer of Last year, Jaquet Corporation's variable costing net...

Question 18

Leibson Company, which has only one product, has provided the following data concerning its most recent month of operations:   
The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare a contribution format income statement for the month using variable costing.
d. Prepare an income statement for the month using absorption costing.
e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Accepted Answer

a. & b. Unit product

Question 19

A cost that would be included in product costs under both absorption costing and variable costing would be:

Accepted Answer

A)  supervisory salaries. 
B)  equipment depreciation. 
C)  variable manufacturing costs. 
D)  variable selling expenses. 
A)  supervisory salaries. 
B)  equipment depreciation. 
C)  variable manufacturing costs. 
D)  variable selling expenses.

Question 20

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations:  
-The total contribution margin for the month under the variable costing approach is:

Accepted Answer

A)  $273,000 
B)  $42,000 
C)  $84,500 
D)  $312,000 
A)  $273,000 
B)  $42,000 
C)  $84,500 
D)  $312,000

Exam 7: Variable Costing: a Tool for Management

Net operating income is not affected by changes in production when absorption costing is used.

Dewiel Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years: -What was the absorption costing net operating income last year?

Gallager Company, which has only one product, has provided the following data concerning its most recent month of operations: -The total gross margin for the month under the absorption costing approach is:

Weber Company computes net operating income under both the absorption costing approach and the variable costing approach. For a given year the absorption costing net operating income was greater than the variable costing net operating income. This fact suggests that:

Baylor Inc., which produces a single product, has provided the following data for its most recent month of operations: There were no beginning or ending inventories. The variable costing unit product cost was:

Faxon Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the net operating income for the month under absorption costing?

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the total period cost for the month under the absorption costing approach?

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the unit product cost for the month under variable costing?

Which of the following costs at a manufacturing company would be treated as a product cost under the absorption costing method?

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total gross margin for the month under absorption costing is:

The costs assigned to units in inventory are typically lower under absorption costing than under variable costing.

Last year, Gransky Corporation's variable costing net operating income was $52,100 and its ending inventory increased by 400 units. Fixed manufacturing overhead cost was $7 per unit. What was the absorption costing net operating income last year?

Last year, Jaquet Corporation's variable costing net operating income was $58,000. The fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $9,000. Required: Determine the absorption costing net operating income last year. Show your work!

A cost that would be included in product costs under both absorption costing and variable costing would be:

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations: -The total contribution margin for the month under the variable costing approach is:

Managerial Accounting and the Business Environment

Managerial Accounting and Cost Concepts

Systems Design: Job-Order Costing

Systems Design: Process Costing

Cost Behavior Analysis and Use

Cost-Volume-Profit Relationship

Activity Based Costing: a Tool to Aid Decision-Making

Profit Planning

Flexible Budgets and Performance Analysis

Standard Costs and Operating Performance Measures

Segment Reporting, Decentralization, and the Balanced Scorecard

Relevant Costs for Decision Making

Capital Budgeting Decisions

How Well Am I Doing Statement of Cash Flows

How Well Am I Doing Financial Statement Analysis

Pricing Products and Services

Profitability Analysis

Further Classification of Labor Costs

Cost of Quality

the Predetermined Overhead Rate and Capacity

Fifo Method

Service Department Allocations

Least-Squares Regression Computations

Abc Action Analysis

Using a Modified Form of Activity-Based Costing to

Predetermined Overhead Rates and Overhead Analysis

Journal Entries to Record Variances

Transfer Pricing

Service Department Charges

The Concept of Present Value

Income Taxes in Capital Budgeting Decisions

The Direct Method of Determining the Net Cash Provided by

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