Question 1

Given the following data, total product cost per unit under variable costing is $7.09.

Accepted Answer

A) True 
 B)False

Question 2

A company normally sells a product for $20 per unit. Variable per unit costs for this product are: $2 direct materials, $4 direct labor, and $1.50 variable overhead. The company is currently operating at 70% of capacity producing 14,000 units per year. Total fixed costs are $42,000 per year. The company should not accept a special order for 2,000 units which would be sold for $10 per unit because there would be an incremental loss on the order.

Accepted Answer

A) True 
 B)False

Question 3

Under absorption costing, which of the following statements is not true?

Accepted Answer

A)  Over production and inventory buildup can occur because of how managers are evaluated and rewarded. 
B)  The fixed costs per unit decline as more units are produced. 
C)  Variable inventory costs are treated in the same manner as they are under variable costing. 
D)  Fixed inventory costs are treated in the same manner as they are under variable costing. 
E)  All manufacturing costs are assigned to products.

Question 4

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $250,000. The company produced 25,000 units, and sold 20,000 units, leaving 5,000 units in inventory at year-end. What is the value of ending inventory under absorption costing?

Accepted Answer

A)  $60,000 
B)  $110,000 
C)  $50,000 
D)  $250,000

Question 5

A company reports the following information regarding its production cost:
  Required: Perform the following independent calculations.
a. Compute total variable overhead cost if the production cost per unit under variable costing is $73.
b. Compute total variable overhead cost if the production cost per unit under absorption costing is $73.

Accepted Answer

The answer of A company reports the following information regarding...

Question 6

Identify the treatment of each of the following costs under variable costing and absorption costing:

Accepted Answer

The answer of Identify the treatment of each of the...

Question 7

________ is equal to Sales minus Variable manufacturing costs.

Accepted Answer

The answer of ________ is equal to Sales minus Variable...

Question 8

Assume a company sells a given product for $18 per unit. Variable selling costs are $0.70 per unit and variable production costs are $5.30 per unit. If the company breaks even when selling 4,000,000 units, what are total fixed costs?

Accepted Answer

The answer of Assume a company sells a given product...

Question 9

________ is the amount remaining from manufacturing margin after all variable selling, general and administrative expenses have been deducted.

Accepted Answer

The answer of ________ is the amount remaining from manufacturing...

Question 10

Pact Company had net income of $972,000 based on variable costing. Beginning and ending inventories were 7,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was $3.61 for both the beginning and ending inventory. What is net income under absorption costing?

Accepted Answer

A)  $962,614 
B)  $1,018,923 
C)  $925,077 
D)  $969,400 
E)  $981,379

Question 11

Under variable costing, product costs consist of direct labor, direct materials, and ________.

Accepted Answer

The answer of Under variable costing, product costs consist of...

Question 12

Gage Company reports the following information for its first year of operations:  If the company's cost per unit of finished goods using variable costing is $63, what is total variable overhead?

Accepted Answer

A)  $21,000 
B)  $71,500 
C)  $77,000 
D)  $19,500 
E)  $16,590

Question 13

________ costing treats fixed overhead as a period cost.

Accepted Answer

The answer of ________ costing treats fixed overhead as a...

Question 14

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

Accepted Answer

A) True 
 B)False

Question 15

Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table:  Given this information, which of the following is true?

Accepted Answer

A)  Net income under variable costing will exceed net income under absorption costing by $50,000. 
B)  Net income under absorption costing will exceed net income under variable costing by $50,000. 
C)  Net income will be the same under both absorption and variable costing. 
D)  Net income under variable costing will exceed net income under absorption costing by $60,000. 
E)  Net income under absorption costing will exceed net income under variable costing by $60,000.

Question 16

Which of the following costing methods charges all manufacturing costs to its products?

Accepted Answer

A)  Direct costing 
B)  ABC costing 
C)  Variable costing 
D)  Absorption costing

Question 17

When there are zero units in Beginning Finished Goods Inventory and the units produced are more than the units sold, the income will be lower under variable costing than under absorption costing.

Accepted Answer

A) True 
 B)False

Question 18

Home Base, Inc. reports the following production cost information:
  Assume that productions costs have remained the same since the previous period and all units are sold for $137.00 per unit.
a. Compute production cost per unit under variable costing.
b. Compute production cost per unit under absorption costing.
c. Determine net income using variable costing.
d. Determine net income using absorption costing.

Accepted Answer

The answer of Home Base, Inc. reports the following production...

Question 19

When the number of units sold exceeds the number of units produced, income reported under absorption costing will be lower than variable costing. Which of the following gives the best justification of the above statement?

Accepted Answer

A)  Income under absorption costing is always less than income reported using variable costing, regardless of the number of units produced. 
B)  Income under absorption costing is always more than income reported using variable costing, regardless of the number of units produced. 
C)  The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory. 
D)  The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.

Question 20

Given the Cool Pools Company data, what is net income using variable costing?

Accepted Answer

A)  $1,649,480 
B)  $1,648,600 
C)  $1,627,150 
D)  $1,709,480 
E)  $1,708,600

Exam 6: Variable Costing and Analysis

Given the following data, total product cost per unit under variable costing is $7.09.

Under absorption costing, which of the following statements is not true?

Identify the treatment of each of the following costs under variable costing and absorption costing:

________ is equal to Sales minus Variable manufacturing costs.

Assume a company sells a given product for $18 per unit. Variable selling costs are $0.70 per unit and variable production costs are $5.30 per unit. If the company breaks even when selling 4,000,000 units, what are total fixed costs?

________ is the amount remaining from manufacturing margin after all variable selling, general and administrative expenses have been deducted.

Pact Company had net income of $972,000 based on variable costing. Beginning and ending inventories were 7,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was $3.61 for both the beginning and ending inventory. What is net income under absorption costing?

Under variable costing, product costs consist of direct labor, direct materials, and ________.

Gage Company reports the following information for its first year of operations: If the company's cost per unit of finished goods using variable costing is $63, what is total variable overhead?

________ costing treats fixed overhead as a period cost.

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

Which of the following costing methods charges all manufacturing costs to its products?

When there are zero units in Beginning Finished Goods Inventory and the units produced are more than the units sold, the income will be lower under variable costing than under absorption costing.

When the number of units sold exceeds the number of units produced, income reported under absorption costing will be lower than variable costing. Which of the following gives the best justification of the above statement?

Given the Cool Pools Company data, what is net income using variable costing?