Deck 12: Absorption Versus Variable Costing

Question 1

When computing product costs, direct materials, direct labor, and all manufacturing overhead (fixed and variable) are used with

A)product costing.
B)full costing.
C)variable costing.
D)absorption costing.

Answer 1

absorption costing.

Question 2

All the following are true for absorption costing, except

A)is used for GAAP reporting purposes.
B)is used for external reporting purposes only.
C)is also known as standard costing.
D)treats fixed manufacturing overhead as a period cost.

Answer 2

treats fixed manufacturing overhead as a period cost.

Question 3

Operating income, using absorption costing, is gross profit less

A)cost of goods sold.
B)fixed manufacturing overhead and fixed operating expenses.
C)fixed and variable operating expenses.
D)fixed and variable manufacturing overhead.

Answer 3

fixed and variable operating expenses.

Question 4

Income statements, using absorption costing, are sometimes difficult to interpret because they

A)omit variable expenses when computing operating income.
B)shift portions of fixed manufacturing overhead between periods according to changing levels of inventory.
C)include all fixed manufacturing overhead in the calculation of operating income.
D)ignore inventory levels when determining cost of goods sold.

Question 5

The formula for budgeted fixed manufacturing overhead rate is

A)budgeted usage of cost driver divided by total budgeted fixed MOH.
B)total budgeted fixed MOH divided by budgeted usage of cost driver.
C)budgeted usage of cost driver times total budgeted fixed MOH.
D)total budgeted fixed MOH times budgeted usage of cost driver.

Question 6

Determining the numerator and denominator when calculating the budgeted fixed-MOH rate

A)can vary for each company and each department and will have no impact on the financial statements.
B)can vary between departments and will impact the financial statements.
C)will not matter, and departments can choose whichever method will increase operating income.
D)will not vary, and all companies and departments will use the same cost drivers.

Question 7

The formula for applied fixed MOH is

A)budgeted fixed MOH rate times the actual units produced.
B)budgeted fixed MOH rate divided by the actual units produced.
C)the actual units produced divided by the budgeted fixed MOH.
D)budgeted fixed MOH rate times the budgeted units produced.

Question 8

The fixed MOH volume variance measures

A)the difference between the budgeted fixed MOH cost and what was spent on fixed MOH.
B)the difference between what a company spends versus what a company planned to spend.
C)the actual usage of capacity compared to the planned usage of capacity.
D)the amount of fixed MOH incurred versus the budgeted fixed MOH.

Question 9

The formula for fixed MOH volume variance is

A)budgeted fixed MOH costs less actual fixed MOH.
B)budgeted fixed MOH costs less applied fixed MOH.
C)units budgeted less actual units produced times budgeted MOH rate.
D)actual units produced less actual units sold times budgeted fixed MOH rate.

Question 10

Which fixed MOH variances help explain the under or overapplied fixed MOH that results in a difference in the fixed MOH Control account?

A)Fixed MOH price variance.
B)Fixed MOH volume variance.
C)Both the Fixed MOH price variance and Fixed MOH volume variance.
D)Only the total Fixed MOH variance.

Question 11

Conform AI planned to produce 6,000 units but only produced 5,300 for the current year. They had a beginning inventory of 300 units with variable manufacturing cost of $11 per unit. Budgeted fixed MOH for the year was $72,000 with actual costs incurred of $66,000. What will Conform AI report as total overhead variance for the current year?

A)$2,400 F.
B)$2,400 U.
C)$6,000 F.
D)$6,000 U.

Question 12

Conform AI planned to produce 6,000 units but only produced 5,300 for the current year. They had a beginning inventory of 300 units with variable manufacturing cost of $11 per unit. Budgeted fixed MOH for the year was $72,000 with actual costs incurred of $66,000. What will Conform AI report as the fixed MOH price variance for the current year?

A)$2,400 F.
B)$2,400 U.
C)$6,000 F.
D)$6,000 U.

Question 13

Conform AI planned to produce 6,000 units but only produced 5,300 for the current year. They had a beginning inventory of 300 units with variable manufacturing cost of $11 per unit. Budgeted fixed MOH for the year was $72,000 with actual costs incurred of $66,000. What will Conform AI report as fixed MOH volume variance for the current year?

A)$2,400 F.
B)$2,400 U.
C)$8,400 F.
D)$8,400 U.

Question 14

Angels R Us is currently operating at 100% capacity and incurred the following costs during the first month of operations: If the company has ending inventory of 1,600 units for the month, how much inventory would be reported on the balance sheet using absorption costing?

A)$64,000.
B)$56,000.
C)$66,400.
D)$78,400.

Question 15

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the Fixed MOH volume variance for year 1.

A)$15,000 F.
B)$15,000 U.
C)$13,500 F.
D)$13,500 U.

Question 16

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the adjusted COGS for year 1.

A)$286,000.
B)$418,000.
C)$431,500.
D)$484,000.

Question 17

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the gross margin for year 1.

A)$220,000.
B)$268,000.
C)$272,500.
D)$418,000.

Question 18

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the operating income for year 1.

A)($56,000).
B)($3,500).
C)$10,000.
D)$142,000.

Question 19

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the Fixed MOH volume variance for year 2.

A)$13,500 F.
B)$13,500 U.
C)$18,000 F.
D)$18,000 U.

Question 20

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the adjusted COGS for year 2.

A)$351,000.
B)$495,000.
C)$513,000.
D)$594,000.

Question 21

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the gross margin for year 2.

A)$209,000.
B)$270,000.
C)$351,000.
D)$360,000.

Question 22

Crystal, the owner of Crystal Clean, is planning for the next year. She uses the absorption method to determine the evaluation of employees and how much to increase their hourly wage. She has budgeted the following information: There were no price or efficiency variances for either year. Crystal writes off any fixed MOH volume variance directly to COGS. Calculate the operating income for year 2.

A)($67,000).
B)$(21,000).
C)$60,000.
D)$69,000.

Question 23

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses absorption costing, how much is the per unit product cost?

A)$40.
B)$43.
C)$47.
D)$50.

Question 24

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses absorption costing, what will be reported as cost of goods sold?

A)$4,200,000.
B)$4,800,000.
C)$4,935,000.
D)$5,640,000.

Question 25

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses absorption costing, what will be reported as the ending inventory value?

A)$600,000.
B)$645,000.
C)$705,000.
D)$750,000.

Question 26

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses absorption costing, what will be reported as gross margin?

A)$2,760,000.
B)$3,465,000.
C)$3,600,000.
D)$3,885,000.

Question 27

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses absorption costing, what will be reported as operating income?

A)$2,370,000.
B)$2,685,000.
C)$2,970,000.
D)$3,075,000.

Question 28

The following information applies to Hawks Corporation: Using absorption costing, how much will the per unit product cost be?

A)$42.
B)$52.
C)$54.
D)$81.

Question 29

The following information applies to Hawks Corporation: Using absorption costing, what will Hawks record as total cost of goods sold, assuming no variances were reported?

A)$1,512,000.
B)$1,872,000.
C)$1,944,000.
D)$2,916,000.

Question 30

The following information applies to Hawks Corporation: Using absorption costing, what will Hawks record as gross margin if the units were sold for $95 each and assuming no variances were reported?

A)$504,000.
B)$1,476,000.
C)$1,548,000.
D)$1,908,000.

Question 31

The following information applies to Hawks Corporation: Using absorption costing, what will Hawks record as operating income if the units were sold for $95 each and assuming no variances were reported?

A)$556,000.
B)$988,000.
C)$1,036,000.
D)$1,108,000.

Question 32

When computing product costs, direct materials, direct labor, and only variable manufacturing overhead are used with

A)product costing.
B)full costing.
C)variable costing.
D)absorption costing.

Question 33

Fixed manufacturing overhead costs are recognized as period costs when incurred using

A)product costing.
B)full costing.
C)variable costing.
D)absorption costing.

Question 34

Which of the following costs are charged to the product when using variable costing?

A)variable manufacturing overhead.
B)fixed manufacturing overhead.
C)variable operating costs.
D)fixed operating costs.

Question 35

Operating income, using variable costing, is contribution margin less

A)cost of goods sold.
B)fixed manufacturing overhead and fixed operating expenses.
C)fixed and variable operating expenses.
D)fixed and variable manufacturing overhead.

Question 36

Variable costing

A)is used for GAAP reporting purposes.
B)is used for external reporting purposes only.
C)is also known as standard costing.
D)treats fixed manufacturing overhead as a period cost.

Question 37

On an income statement prepared using variable costing, to calculate contribution margin, a company will subtract what from sales?

A)variable manufacturing costs.
B)variable cost of goods sold.
C)cost of goods sold.
D)variable manufacturing and operating costs.

Question 38

On an income statement prepared using variable costing, variable operating expenses are deducted from ____________ to get ________________.

A)sales, contribution margin.
B)contribution margin, operating income.
C)cost of goods sold, contribution margin.
D)sales, gross margin.

Question 39

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses variable costing, how much is the per unit product cost?

A)$40.
B)$43.
C)$47.
D)$50.

Question 40

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses variable costing, what will be reported as cost of goods sold?

A)$4,200,000.
B)$4,800,000.
C)$4,935,000.
D)$5,640,000.

Question 41

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses variable costing, what will be reported as the ending inventory value?

A)$600,000.
B)$645,000.
C)$705,000.
D)$750,000.

Question 42

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses variable costing, what will be reported as contribution margin?

A)$2,760,000.
B)$3,465,000.
C)$3,600,000.
D)$3,885,000.

Question 43

BioClinic sells its product for $80 per unit. During 2025, it produced 120,000 units and sold 105,000 units. Costs per unit are: direct materials $25, direct labor $10, variable overhead $5, and variable operating expenses $3. Fixed costs are $840,000 manufacturing overhead, and $75,000 operating expenses. Assuming no variances were reported, no beginning inventory and the company uses variable costing, what will be reported as operating income?

A)$2,370,000.
B)$2,685,000.
C)$2,970,000.
D)$3,075,000.

Question 44

The following information applies to Hawks Corporation: Using variable costing, how much will the per unit product cost be?

A)$42.
B)$52.
C)$54.
D)$81.

Question 45

The following information applies to Hawks Corporation: Using variable costing, what will Hawks record as total cost of goods sold, assuming no variances were reported?

A)$1,512,000.
B)$1,872,000.
C)$1,944,000.
D)$2,916,000.

Question 46

The following information applies to Hawks Corporation: Using variable costing, what will Hawks record as contribution margin if the units were sold for $95 each and assuming no variances were reported?

A)$504,000.
B)$1,476,000.
C)$1,548,000.
D)$1,908,000.

Question 47

The following information applies to Hawks Corporation: Using variable costing, what will Hawks record as operating income if the units were sold for $95 each and assuming no variances were reported?

A)$556,000.
B)$988,000.
C)$1,036,000.
D)$1,108,000.

Question 48

Angels R Us is currently operating at 100% capacity and incurred the following costs during the first month of operations: If the company has ending inventory of 1,600 units for the month, how much inventory would be reported on the balance sheet using variable costing?

A)$64,000.
B)$56,000.
C)$66,400.
D)$78,400.

Question 49

When the monthly units produced are constant, and sales in units are less than the units produced, net income determined with absorption costing procedures will

A)always be greater than operating income determined with variable costing.
B)always be less than operating income determined with variable costing.
C)be equal to operating income determined using variable costing.
D)be equal to contribution margin per unit times units sold.

Question 50

When using variable costing and absorption costing, fixed manufacturing costs are treated as

A)product costs under both.
B)product costs using absorption costing and period cost with variable costing.
C)period costs under both.
D)period costs using absorption costing and product cost with variable costing.

Question 51

When using variable costing and absorption costing, variable manufacturing costs are treated as

A)product costs under both.
B)product costs using absorption costing and period cost with variable costing.
C)period costs under both.
D)period costs using absorption costing and product cost with variable costing.

Question 52

Which of the following statements is true?

A)Absorption costing net income exceeds variable costing net income when units produced are greater than units sold.
B)Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
C)Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
D)Absorption costing net income exceeds variable costing net income when units produced and sold are equal.

Question 53

The product cost per unit for absorption costing is

A)always higher than the product cost for variable costing.
B)always lower than the product cost for variable costing.
C)usually, but not always, higher than the product cost for variable costing.
D)usually, but not always, lower than the product cost for variable costing.

Question 54

Operating income under absorption costing is higher than operating income under variable costing

A)always, no matter how many units are sold and produced.
B)when units produced equal units sold.
C)when units produced are more than units sold.
D)when units produced are less than units sold.

Question 55

When the units produced is greater than the units sold,

A)variable and fixed manufacturing overhead costs are deferred until a future period when using absorption costing.
B)variable and fixed manufacturing overhead costs are deferred until a future period when using variable costing.
C)some fixed manufacturing overhead costs are deferred until a future period when using absorption costing.
D)some variable manufacturing overhead costs are deferred until a future period when using absorption costing.

Question 56

When the units sold is greater than the units produced,

A)ending inventory using absorption costing will be greater than ending inventory under variable costing.
B)ending inventory using absorption costing will be less than ending inventory under variable costing.
C)ending inventory using absorption costing equal ending inventory under variable costing.
D)ending inventory using absorption costing could be greater than, less than or equal to ending inventory under variable costing.

Question 57

When using ____________ costing, management may be tempted to produce more units than demand when trying to increase operating income.

A)absorption.
B)variable.
C)both absorption and variable.
D)neither absorption or variable.

Question 58

If bonuses are awarded to a manager based on operating income, the manager may choose to increase production to meet the desired operating income when using

A)variable costing to increase net income
B)variable costing to decrease net income.
C)absorption costing to increase net income.
D)variable costing to increase net income.

Question 59

When comparing variable costing to absorption costing, which of the following would be a potential advantage of using variable costing?

A)Using variable costing is consistent with using the cost-volume-profit analysis.
B)Operating income is affected by the changes in production.
C)Operating income calculated using variable costing is not closely tied to changes in sales levels.
D)All the answers are potential advantages.

Question 60

David Industries expects to sell 260,000 units in 2025. The manager is under pressure to increase operating income for the same period of time. He is trying to decide whether to produce the units required for demand, 260,000 or produce 300,000 units. David Industries would have a higher operating income if the manager decided to produce

A)260,000 units under variable costing.
B)260,000 units under absorption costing.
C)300,000 under variable costing.
D)300,000 under absorption costing.

Question 61

Powell Corporation produced 80,000 units and sold 78,000 units in its first year of operations. If the company had produced 1,000 fewer units, what would have been the effect on operating income under variable and absorption costing?

A)There would be no effect on operating income under variable costing, but operating income under absorption costing would increase.
B)There would be no effect on operating income under variable costing, but operating income under absorption costing would decrease.
C)Operating income under variable costing would decrease, but operating income under absorption costing would increase.
D)Operating income under both variable costing and absorption costing would decrease.

Question 62

During 2025, inventory increased by 7,000 units. The following information for the company is available: If the company uses absorption costing rather than variable costing, the effect on operating income would be a

A)$42,000 decrease.
B)$42,000 increase.
C)$52,500 increase.
D)$52,500 decrease.

Question 63

During 2025, KM Construction sold 10,000 units, with beginning and ending units for the year of 1,000. Manufacturing costs were as follows: Which of the following statements is true?

A)Net income will be the same under both variable and absorption costing.
B)Net income under variable costing will be $45,000 less than net income under absorption costing.
C)Net income under absorption costing will be $40,000 more than under variable costing.
D)The difference in net income cannot be determined.

Question 64

Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year: The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For 2025,

A)absorption costing operating income exceeded variable costing operating income by $3,000.
B)variable costing operating income exceeded absorption costing operating income by $3,000.
C)the operating income for absorption costing equaled operating income for variable costing.
D)the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing.

Question 65

Angels R Us is currently operating at 100% capacity and incurred the following costs during the first month of operations: If the company has ending inventory of 1,600 units for the month, what would be the difference in inventory reported on the balance sheet between absorption and variable costing?

A)Absorption would report $8,000 more in inventory than variable costing.
B)Absorption would report $8,000 less in inventory than variable costing.
C)Absorption would report $2,400 more in inventory than variable costing.
D)Absorption would report $2,400 less in inventory than variable costing.

Question 66

Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year: The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For 2026,

A)absorption costing operating income exceeded variable costing operating income by $5,000.
B)variable costing operating income exceeded absorption costing operating income by $5,000.
C)the operating income for absorption costing equaled operating income for variable costing.
D)the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing.

Question 67

Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year: The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For 2027,

A)absorption costing operating income exceeded variable costing operating income by $1,000.
B)variable costing operating income exceeded absorption costing operating income by $1,000.
C)the operating income for absorption costing equaled operating income for variable costing.
D)the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing.

Question 68

Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year: The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For the three years, 2025 - 2027,

A)absorption costing operating income exceeded variable costing operating income by $7,000.
B)variable costing operating income exceeded absorption costing operating income by $7,000.
C)the operating income for absorption costing equaled operating income for variable costing.
D)the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing.

Question 69

The efficient level of activity performance that is active in the production of goods and services is known as

A)idle capacity.
B)nonproductive capacity.
C)productive capacity.
D)efficient capacity.

Question 70

An example of activity capacity that is acquired but not used and will not provide future benefits is

A)idle capacity.
B)nonproductive capacity.
C)productive capacity.
D)efficient capacity.

Question 71

If a company acquires the resources needed to perform an activity and the resources are used for its intended purposes, it is knowns as

A)idle capacity.
B)nonproductive capacity.
C)productive capacity.
D)efficient capacity.

Question 72

An example of activity capacity that is acquired but not used but could be converted for future benefits is

A)idle capacity.
B)nonproductive capacity.
C)productive capacity.
D)efficient capacity.

Question 73

The type of available capacity that signals the need to improve factory operations is

A)idle capacity.
B)nonproductive capacity.
C)productive capacity.
D)efficient capacity.

Question 74

The type of available capacity that signals the potential for growth opportunities or policy changes is

A)idle capacity.
B)nonproductive capacity.
C)productive capacity.
D)efficient capacity.

Question 75

When calculating the budgeted number of units to be produced, all the following are options except:

A)theoretical capacity.
B)practical capacity.
C)productive capacity.
D)normal capacity.

Question 76

Theoretical capacity

A)results in lower, more attainable production expectations based on existing capacity.
B)results in the lowest budgeted fixed MOH rate.
C)results in a higher fixed MOH rate than the normal capacity.
D)results in the highest fixed MOH rate.

Question 77

Practical capacity

A)typically leads to an unusually large, unfavorable fixed-MOH volume variance.
B)will lead to an unfavorable fixed MOH volume variance if actual production exceeds planned practical capacity.
C)will lead to a fixed MOH rate that will fluctuate with demand changes.
D)will lead to an unfavorable fixed MOH volume variance if actual production does not meet planned practical capacity.

Question 78

Normal capacity

A)results in the highest product cost.
B)is the method used according to IRS guidelines.
C)results in the lowest product cost.
D)results in moderate prices.

Question 79

All the following are true regarding theoretical capacity except:

A)Theoretical capacity results in the lowest product cost.
B)Theoretical capacity results in the lowest budgeted fixed MOH rate.
C)Theoretical capacity usually gives unrealistic targets, which demotivates employees.
D) Theoretical capacity results in the highest fixed MOH rate.

Question 80

All the following are true regarding practical capacity except:

A)Practical capacity produces challenging but feasible goals.
B)Practical capacity will lead to an unfavorable fixed MOH volume variance if actual production exceeds planned practical capacity.
C)Practical capacity has a moderate fixed MOH rate and moderate prices.
D)Practical capacity will lead to an unfavorable fixed MOH volume variance if actual production does not meet planned practical capacity.