Question 1

Jordan Manufacturing has the following cost information for year 20X9:  During 20X9, Jordan produced 12,500 units, out of which 11,000 were sold for $60 each. What is Jordan's net income assuming the company uses absorption costing:

Accepted Answer

A) $421,600. 
B) $412,000. 
C) $425,000. 
D) $457,600. 
E) None of the answers is correct.

Question 2

The underlying difference between absorption costing and variable costing lies in the treatment of:

Accepted Answer

A) direct labor. 
B) variable manufacturing overhead. 
C) ﬁxed manufacturing overhead. 
D) variable selling and administrative expenses. 
E) ﬁxed selling and administrative expenses.

Question 3

Sawyer Industries began business at the start of the current year.The company planned to produce 25,000 units, and actual production conformed to expectations.Sales totaled 22,000 units at $30 each.Costs incurred were:  If there were no variances, the company's absorption-costing income would be:

Accepted Answer

A) $190,000. 
B) $202,000. 
C) $208,000. 
D) $220,000. 
E) None of the answers is correct.

Question 4

Xenon Enterprises (XE) produces two extruding machines that are popular with food processors: No.616 and No.717.Machine No.616 has an average selling price of $160,000, whereas No.717 typically sells for approximately $155,000.The company is extremely focused on quality and has provided the following information:  Required: a.Classify the preceding costs as prevention, appraisal, internal failure, or external failure. b.Using the classiﬁcations in requirement (1), compute XE's quality costs for machine No.616 in dollars and as a percentage of sales revenues.Also calculate prevention, appraisal, internal failure, and external failure costs as a percentage of total quality costs. c.Repeat requirement (b) for machine No.717. d.Comment on your ﬁndings, noting whether the company is "investing" its quality expenditures differently for the two machines. e.Quality costs can be classiﬁed as observable or hidden.What are hidden quality costs, and how do these costs differ from observable costs?

Accepted Answer

The answer of Xenon Enterprises (XE) produces two extruding machines...

Question 5

Assuming that the number of units produced is less than the number of units sold, which of the following statements is true when comparing net income using absorption and variable costing?

Accepted Answer

A) Absorption costing will yield a higher net income. 
B) Net income will be the same under both methods. 
C) Variable costing will yield a higher net income. 
D) The sales price per unit will be less using absorption costing. 
E) None of these statements is true.

Question 6

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

Accepted Answer

A) The income statement discloses the amount of gross margin generated during the reporting period. 
B) Fixed selling and administrative expenses are treated in the same manner as ﬁxed manufacturing 
C) Both variable and absorption costing can be used for external ﬁnancial reporting. 
D) Variable selling costs are written-off as expenses of the accounting period. 
E) Fixed manufacturing overhead is attached to each unit produced.

Question 7

Variable costing of inventory and absorption costing of inventory is relevant for which of the following types of businesses?

Accepted Answer

A) Manufacturing ﬁrms. 
B) Not-for-proﬁt companies. 
C) Governmental units. 
D) Service ﬁrms. 
E) All of the answers are correct.

Question 8

Consider the following statements about absorption- and variable-costing income: I.Yearly income reported under absorption costing will differ from income reported under variable costing if production and sales volumes differ. II.In the long-run, total income reported under absorption costing will often be close to that reported under variable costing. III.Differences in income under absorption and variable costing can often be reconciled by multiplying the change in inventory (in units) by the variable manufacturing overhead cost per unit. Which of the above statements is (are) true?

Accepted Answer

A) I only. 
B) II only. 
C) III only. 
D) I and II. 
E) II and III.

Question 9

Mallory Industries has the following cost information for the year just ended:  During the year, Mallory produced 10,000 units, out of which 9,100 were sold for $50 each. What is net income under variable costing?

Accepted Answer

A) $251,250. 
B) $254,850. 
C) $285,000. 
D) $291,250. 
E) None of the answers is correct.

Question 10

All of the following are expensed under variable costing except:

Accepted Answer

A) variable manufacturing overhead. 
B) ﬁxed manufacturing overhead. 
C) variable selling and administrative costs. 
D) ﬁxed selling and administrative costs. 
E) variable selling and administrative costs and ﬁxed selling and administrative costs.

Question 11

What is a product's grade, as a characteristic of quality? Give a service industry example.

Accepted Answer

The answer of What is a product's grade, as a...

Question 12

ProTech 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:  If there were no variances, the company's variable-costing income would be:

Accepted Answer

A) $155,000. 
B) $212,000. 
C) $240,500. 
D) $592,000. 
E) None of the answers is correct.

Question 13

Which of the following conditions would cause absorption-costing income to be lower than variable-costing income?

Accepted Answer

A) Units sold exceeded units produced. 
B) Units sold equaled units produced. 
C) Units sold were less than units produced. 
D) Sales prices decreased. 
E) Selling expenses increased.

Question 14

Which of the following statements about environmental costs is false?

Accepted Answer

A) Remediation costs include offsite, but not onsite, remediation costs. 
B) Abatement costs include costs to reduce or eliminate pollution. 
C) Monitoring costs include the costs of monitoring the regulatory environment as well as monitoring the 
D) Private environmental costs are those borne by a company or individual. 
E) Social environmental costs are those borne by the public at large.

Question 15

Razor Technologies reported $106,000 of income for the year by using variable costing.The company had no beginning inventory, planned and actual production of 50,000 units, and sales of 47,000 units.Standard variable manufacturing costs were $15 per unit, and total budgeted ﬁxed manufacturing overhead was $150,000.If there were no variances, income under absorption costing would be:

Accepted Answer

A) $52,000. 
B) $97,000. 
C) $106,000. 
D) $115,000. 
E) $160,000.

Question 16

An analytical method that aims at achieving near-perfect results in a production process is known as the zero- defect perspective.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following descriptions would not be found on an income statement prepared using variable costing?

Accepted Answer

A) Sales. 
B) Fixed Costs. 
C) Cost of Goods Sold. 
D) Net income. 
E) All of these options are on the income statement prepared using variable costing.

Question 18

Cagney Industries has the following cost information for the year just ended:  During the year, Cagney produced 6,000 units, out of which 5,400 were sold for $20 each. What is net income under absorption costing?

Accepted Answer

A) $26,000. 
B) $35,000. 
C) $29,000. 
D) $23,000. 
E) None of the answers is correct.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Fort Smith Technologies incurred the following costs during the past year when planned production and actual production each totaled 20,000 units:  If Fort Smith uses variable costing, the total inventoriable costs for the year would be:

Accepted Answer

A) $400,000. 
B) $460,000. 
C) $560,000. 
D) $620,000. 
E) $660,000.

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

Jordan Manufacturing has the following cost information for year 20X9: During 20X9, Jordan produced 12,500 units, out of which 11,000 were sold for $60 each. What is Jordan's net income assuming the company uses absorption costing:

The underlying difference between absorption costing and variable costing lies in the treatment of:

Sawyer Industries began business at the start of the current year.The company planned to produce 25,000 units, and actual production conformed to expectations.Sales totaled 22,000 units at $30 each.Costs incurred were: If there were no variances, the company's absorption-costing income would be: