Question 1

A business operated at 100% of capacity during its first month and incurred the following costs:  If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

Accepted Answer

A)  $24,300 
B)  $28,200 
C)  $22,800 
D)  $34,000

Question 2

Under variable costing, which of the following costs would be included in finished goods inventory?

Accepted Answer

A)  salary of salesperson 
B)  salary of vice-president of finance 
C)  wages of carpenters in a furniture factory 
D)  straight-line depreciation on factory equipment

Question 3

In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales price or unit cost, is referred to as the:

Accepted Answer

A)  sales factor 
B)  cost of goods sold factor 
C)  quantity factor 
D)  price factor

Question 4

If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled $799,500 (78,000 units at $10.25 each), the effect of the unit price factor on the change in sales is:

Accepted Answer

A)  $19,500 decrease 
B)  $19,500 increase 
C)  $20,000 decrease 
D)  $20,000 increase

Question 5

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields gross profit.

Accepted Answer

A) True 
 B)False

Question 6

On the variable costing income statement, the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 7

If the variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the unit cost factor on the change in contribution margin is:

Accepted Answer

A)  $6,400 decrease 
B)  $6,400 increase 
C)  $7,200 increase 
D)  $7,200 decrease

Question 8

At EOM Inc., the beginning inventory is 20,000 units.  All of the units manufactured during the period and 16,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and variable costs are $300 per unit. Determine (a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption income from operations.

Accepted Answer

The answer of At EOM Inc., the beginning inventory is...

Question 9

It would be acceptable to have the selling price of a product just above the variable costs and expenses of making and selling it in:

Accepted Answer

A)  the long run 
B)  the short run 
C)  both the short run and long run 
D)  neither in the short run nor the long run

Question 10

In contribution margin analysis, the unit price or unit cost factor is computed as the difference between the actual unit price or unit cost and the planned unit price or unit cost, multiplied by the actual quantity sold.

Accepted Answer

A) True 
 B)False

Question 11

Another name for variable costing is:

Accepted Answer

A)  indirect costing 
B)  process costing 
C)  direct costing 
D)  differential costing

Question 12

Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption costing concept.

Accepted Answer

A) True 
 B)False

Question 13

In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in unit sales price or cost, is termed the unit price or unit cost factor.

Accepted Answer

A) True 
 B)False

Question 14

Management should focus its sales and production efforts on the product or products that will provide

Accepted Answer

A)  the highest sales revenue 
B)  the lowest product costs 
C)  the maximum contribution margin 
D)  the lowest direct labor hours

Question 15

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the unit price or unit cost factor.

Accepted Answer

A) True 
 B)False

Question 16

For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will be smaller than the income from operations reported under variable costing.

Accepted Answer

A) True 
 B)False

Question 17

If the variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the change in contribution margin is:

Accepted Answer

A)  $10,800 decrease 
B)  $10,800 increase 
C)  $10,000 increase 
D)  $10,000 decrease

Question 18

In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.

Accepted Answer

A) True 
 B)False

Question 19

The systematic examination of differences between planned and actual contribution margins is termed contribution margin analysis.

Accepted Answer

A) True 
 B)False

Question 20

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

Accepted Answer

A)  exceed units sold 
B)  equal units sold 
C)  are less than units sold 
D)  are equal to or greater than units sold

Exam 6: Variable Costing for Management Analysis

A business operated at 100% of capacity during its first month and incurred the following costs: If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

Under variable costing, which of the following costs would be included in finished goods inventory?

In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales price or unit cost, is referred to as the:

If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled $799,500 (78,000 units at $10.25 each) , the effect of the unit price factor on the change in sales is:

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields gross profit.

On the variable costing income statement, the amounts representing the difference between the contribution margin and income from operations is the fixed manufacturing costs and fixed selling and administrative expenses.

If the variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each) , the effect of the unit cost factor on the change in contribution margin is:

It would be acceptable to have the selling price of a product just above the variable costs and expenses of making and selling it in:

In contribution margin analysis, the unit price or unit cost factor is computed as the difference between the actual unit price or unit cost and the planned unit price or unit cost, multiplied by the actual quantity sold.

Another name for variable costing is:

Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption costing concept.

In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in unit sales price or cost, is termed the unit price or unit cost factor.

Management should focus its sales and production efforts on the product or products that will provide

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the unit price or unit cost factor.

For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will be smaller than the income from operations reported under variable costing.

If the variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each) , the effect of the quantity factor on the change in contribution margin is:

In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.

The systematic examination of differences between planned and actual contribution margins is termed contribution margin analysis.

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured: