Question 1

_______________ and _______________ are product costs which can be directly traced to the product.

Accepted Answer

Direct lab...

Question 2

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 below. 
  Production costs  Direct materials $.80 per unit  Direct labor $.70 per unit  Variable overhead $500,000 in total  Fixed overhead $450,000 in total  Non-production costs  Variable selling and administrative $30,000 in total  Fixed selling and administrative $490,000 in total \begin{array}{l}	ext { Production costs }\	ext { Direct materials } & \$ .80 	ext { per unit } \	ext { Direct labor } & \$ .70 	ext { per unit } \	ext { Variable overhead } & \$ 500,000 	ext { in total } \	ext { Fixed overhead } & \$ 450,000 	ext { in total }\	ext { Non-production costs }\	ext { Variable selling and administrative }&\$ 30,000 	ext { in total }\	ext { Fixed selling and administrative }&\$ 490,000 	ext { in total }\end{array} Production costs  Direct materials  Direct labor  Variable overhead  Fixed overhead  Non-production costs  Variable selling and administrative  Fixed selling and administrative ​$.80 per unit $.70 per unit $500,000 in total $450,000 in total $30,000 in total $490,000 in total ​ 
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. F) C) and D)
G) B) and E)

Question 3

Decko Industries reported the following monthly data. 
  Units produced 52,000 units  Sales price $33 per unit  Direct materials $1.50 per unit  Direct labor $2.50 per unit  Variable overhead $3.50 per unit  Fixed overhead $234,000 in total \begin{array} { l l } 	ext { Units produced } & 52,000 	ext { units } \	ext { Sales price } & \$ 33 	ext { per unit } \	ext { Direct materials } & \$ 1.50 	ext { per unit } \	ext { Direct labor } & \$ 2.50 	ext { per unit } \	ext { Variable overhead } & \$ 3.50 	ext { per unit } \	ext { Fixed overhead } & \$ 234,000 	ext { in total }\end{array} Units produced  Sales price  Direct materials  Direct labor  Variable overhead  Fixed overhead ​52,000 units $33 per unit $1.50 per unit $2.50 per unit $3.50 per unit $234,000 in total ​ 
What is the company's contribution margin for this month if 50,000 units were sold?

Accepted Answer

A)   $1,326,000
B)   $1,716,000
C)   $1,275,000
D)   $1,650,000
E)   $1,450,000 F) B) and D)
G) All of the above

Question 4

Sea Company reports the following information regarding its production cost. 
  Units produced 42,000 units  Direct labor $35 per unit  Direct materials $28 per unit  Variable overhead $17 per unit  Fixed overhead $105,000 in total \begin{array} { l l } 	ext { Units produced } & 42,000 	ext { units } \	ext { Direct labor } & \$ 35 	ext { per unit } \	ext { Direct materials } & \$ 28 	ext { per unit } \	ext { Variable overhead } & \$ 17 	ext { per unit } \	ext { Fixed overhead } & \$ 105,000 	ext { in total }\end{array} Units produced  Direct labor  Direct materials  Variable overhead  Fixed overhead ​42,000 units $35 per unit $28 per unit $17 per unit $105,000 in total ​ 
Compute production cost per unit under absorption costing.

Accepted Answer

A)   $28.00
B)   $82.50
C)   $80.00
D)   $63.00
E)   $35.00 F) B) and E)
G) B) and D)

Question 5

Cool Pools, a manufacturer of above ground pools, began operations on January 1 of the current year. During this time, the company produced 45,000 units and sold 44,000 units at a sales price of $60 per unit. Cost information for this year is shown below.
  Production costs  Direct materials $11.25 per unit  Direct labor $3.20 per unit  Variable overhead $315,000 in total  Fixed overhead $39,600 in total  Non-production costs  Variable selling and administrative $2,000 in total  Fixed selling and administrative $6,000 in total \begin{array}{l}	ext { Production costs }\	ext { Direct materials } & \$ 11.25 	ext { per unit } \	ext { Direct labor } & \$ 3.20 	ext { per unit } \	ext { Variable overhead } & \$ 315,000 	ext { in total } \	ext { Fixed overhead } & \$ 39,600 	ext { in total }\	ext { Non-production costs }\	ext { Variable selling and administrative } & \$ 2,000 	ext { in total } \	ext { Fixed selling and administrative } & \$ 6,000 	ext { in total }\\end{array} Production costs  Direct materials  Direct labor  Variable overhead  Fixed overhead  Non-production costs  Variable selling and administrative  Fixed selling and administrative ​$11.25 per unit $3.20 per unit $315,000 in total $39,600 in total $2,000 in total $6,000 in total ​

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

Accepted Answer

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

Question 6

To convert variable costing income to absorption costing income, management will need to change the way fixed overhead costs are treated.

Accepted Answer

A) True 
 B)False

Question 7

If a company has excess capacity, increases in production level will increase variable production costs but not fixed production costs.

Accepted Answer

A) True 
 B)False

Question 8

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.
  Units produced this year 25,000 units  Units sold this year 15,000 units  Direct materials $9 per unit  Direct labor $11 per unit  Variable overhead $75,000 in total  Fixed overhead $137,500 in total \begin{array} { l l } 	ext { Units produced this year } & 25,000 	ext { units } \	ext { Units sold this year } & 15,000 	ext { units } \	ext { Direct materials } & \$ 9 	ext { per unit } \	ext { Direct labor } & \$ 11 	ext { per unit } \	ext { Variable overhead } & \$ 75,000 	ext { in total } \	ext { Fixed overhead } & \$ 137,500 	ext { in total }\end{array} Units produced this year  Units sold this year  Direct materials  Direct labor  Variable overhead  Fixed overhead ​25,000 units 15,000 units $9 per unit $11 per unit $75,000 in total $137,500 in total ​ 
-Given Advanced Company's data, compute cost of finished goods in inventory under absorption costing.

Accepted Answer

A)   $285,000
B)   $712,500
C)   $427,500
D)   $230,000
E)   $345,000 F) B) and C)
G) C) and D)

Question 9

Identify the treatment of each of the following costs under variable costing and absorption costing.
 $$\begin{array} { | l | l | l | l | l | } 
\hline & { \text { Variable Costing } } &&{ \text { Absorption Costing } } \
\hline  & \begin{array} { c } 
\text { Product } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Period } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Product } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Period } \
\text { Cost }
\end{array} \
\hline \text { 1. Direct materials } & & & & \
\hline \text { 2. Direct labor } & & & & \
\hline \text { 3. Variable manufacturing overhead } & & & & \
\hline \text { 4. Fixed manufacturing overhead } & & & & \
\hline \text { 5. Variable selling } & & & & \
\hline \text { 6. Fixed selling } & & & & \
\hline \text { 7. Variable administrative } & & & & \
\hline \text { 8. Fixed administrative } & & & & \
\hline
\end{array}$$

Accepted Answer

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

Question 10

A company is currently operating at 70% capacity producing 8,000 units. Cost information relating to this current production is shown in the table below. $$\begin{array} { | l | r | } 
\hline & \text { Per Unit } \
\hline \text { Sales price } & \$ 15 \
\hline \text { Direct material } & \$ 3.20 \
\hline \text { Direct labor } & \$ 7.10 \
\hline \begin{array} { l } 
\text { Variable } \
\text { overhead }
\end{array} & \$ 0.05 \
\hline \text { Fixed overhead } & \$ 0.60 \
\hline
\end{array}$$
The company has been approached by a customer with a request for a special order for 1,500 units. The sales price per unit for this special order is $10. Should the company accept the special order?

Accepted Answer

8,000/.7 - 8,000 = 3,428 unit ...

Question 11

Stonehenge Inc., a manufacturer of landscaping blocks, began operations on April 1 of the current year. During this time, the company produced 750,000 units and sold 720,000 units at a sales price of $9 per unit. Cost information for this period is shown below. 
(a.) Prepare Stonehenge's December 31st income statement for the current year under absorption costing.
(b.) Prepare Stonehenge's December 31st income statement for the current year under variable costing.

Accepted Answer

Question 12

Blackbird, Incorporated reports the following information regarding its production cost. $$\begin{array} { l l } 
\text { Units produced } & 39,000 \text { units } \
\text { Direct labor } & \$ 13 \text { per unit } \
\text { Direct materials } & \$ 17 \text { per unit } \
\text { Variable overhead } & \$ 7,800,000 \text { in total } \
\text { Fixed overhead } & \$ 9,750,000 \text { in total }
\end{array}$$
(a.) Compute production cost per unit under variable costing.
(b.) Compute production cost per unit under absorption costing.

Accepted Answer

(a.) $13 DL + $17 DM + $7,800,...

Question 13

A company reports the following information regarding its production cost.
Required: Perform the following independent calculations. $$\begin{array} { l l } 
\text { Units produced } & 14,000 \text { units } \
\text { Direct labor } & \$ 13 \text { per unit } \
\text { Direct materials } & \$ 3 \text { per unit } \
\text { Variable overhead } & ? \text { in total } \
\text { Fixed overhead } & \$ 56,000 \text { in total }
\end{array}$$
(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

(a.) $13 DL + $3 DM + VOH/14,000 = $73
V...

Question 14

To convert variable costing net income to absorption costing net income, ____________________ the fixed production cost in ending inventory and _______________________ the fixed production cost in beginning inventory.

Accepted Answer

The answer of To convert variable costing net income to...

Question 15

Income under absorption costing will always be different than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 16

Swisher, Incorporated reports the following annual cost data for its single product. 
  Normal production level 30,000 units  Direct materials $6.40 per unit  Direct labor $3.93 per unit  Variable overhead $5.80 per unit  Fixed overhead $150,000 in total \begin{array} { l l } 	ext { Normal production level } & 30,000 	ext { units } \	ext { Direct materials } & \$ 6.40 	ext { per unit } \	ext { Direct labor } & \$ 3.93 	ext { per unit } \	ext { Variable overhead } & \$ 5.80 	ext { per unit } \	ext { Fixed overhead } & \$ 150,000 	ext { in total }\end{array} Normal production level  Direct materials  Direct labor  Variable overhead  Fixed overhead ​30,000 units $6.40 per unit $3.93 per unit $5.80 per unit $150,000 in total ​ 
This product is normally sold for $48 per unit. If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing?

Accepted Answer

A)   $60,000 decrease.
B)   $90,000 decrease.
C)   There is no change in gross margin.
D)   $90,000 increase.
E)   $60,000 increase. F) B) and D)
G) A) and D)

Question 17

Under absorption costing a company had the following unit costs when 10,000 units were produced.
The total production cost per unit under absorption costing if 25,000 units had been produced would be $11.

Accepted Answer

A) True 
 B)False

Question 18

What is a contribution margin report?

Accepted Answer

A contribution margin report presents co...

Question 19

Digby Company manufactured and sold 37,000 units of its product at a price of $93 per unit. Total variable cost per unit is $60, consisting of $58 in variable production cost and $2 in variable selling and administrative cost. Fixed costs of manufacturing are $350,000.
(a) Compute the manufacturing margin for the company under variable costing.
(b) Compute the contribution margin based on this data.
(c) Compute the gross margin under absorption costing.

Accepted Answer

(a) ($93 - $58) x 37,000 units...

Question 20

________________________ is the exact point where revenues equal expenses.

Accepted Answer

The answer of ________________________ is the exact point where revenues...

Exam 19: Variable Costing and Performance Reporting

Correct Answer
verified
(a.) $13 DL + $17 DM + $7,800,...
View Answer

Correct Answer
verified
(a.) $13 DL + $3 DM + VOH/14,000 = $73
V...
View Answer

If a company has excess capacity, increases in production level will increase variable production costs but not fixed production costs.

Correct Answer
verified

What is a contribution margin report?

Correct Answer
verified
A contribution margin report presents co...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(a) ($93 - $58) x 37,000 units...
View Answer

Income under absorption costing will always be different than income under variable costing.

Correct Answer
verified

Under absorption costing a company had the following unit costs when 10,000 units were produced. The total production cost per unit under absorption costing if 25,000 units had been produced would be $11.

Correct Answer
verified

_ and _ are product costs which can be directly traced to the product.

Correct Answer
verified
Direct lab...
View Answer

To convert variable costing income to absorption costing income, management will need to change the way fixed overhead costs are treated.

Correct Answer
verified

________________________ is the exact point where revenues equal expenses.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
8,000/.7 - 8,000 = 3,428 unit ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

To convert variable costing net income to absorption costing net income, the fixed production cost in ending inventory and ___ the fixed production cost in beginning inventory.

Correct Answer
verified

Correct Answer
verified

Exam 19: Variable Costing and Performance Reporting

Correct Answerverified(a.) $13 DL + $17 DM + $7,800,...View AnswerShow Answer

Correct Answerverified(a.) $13 DL + $3 DM + VOH/14,000 = $73V...View AnswerShow Answer

If a company has excess capacity, increases in production level will increase variable production costs but not fixed production costs.

Correct AnswerverifiedShow Answer

What is a contribution margin report?

Correct AnswerverifiedA contribution margin report presents co...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified(a) ($93 - $58) x 37,000 units...View AnswerShow Answer

Income under absorption costing will always be different than income under variable costing.

Correct AnswerverifiedShow Answer

Under absorption costing a company had the following unit costs when 10,000 units were produced. The total production cost per unit under absorption costing if 25,000 units had been produced would be $11.

Correct AnswerverifiedShow Answer

_______________ and _______________ are product costs which can be directly traced to the product.

Correct AnswerverifiedDirect lab...View AnswerShow Answer

To convert variable costing income to absorption costing income, management will need to change the way fixed overhead costs are treated.

Correct AnswerverifiedShow Answer

________________________ is the exact point where revenues equal expenses.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answerverified8,000/.7 - 8,000 = 3,428 unit ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To convert variable costing net income to absorption costing net income, ____________________ the fixed production cost in ending inventory and _______________________ the fixed production cost in beginning inventory.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
(a.) $13 DL + $17 DM + $7,800,...
View Answer

Correct Answer
verified
(a.) $13 DL + $3 DM + VOH/14,000 = $73
V...
View Answer

Correct Answer
verified

Correct Answer
verified
A contribution margin report presents co...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(a) ($93 - $58) x 37,000 units...
View Answer

Correct Answer
verified

Correct Answer
verified

_ and _ are product costs which can be directly traced to the product.

Correct Answer
verified
Direct lab...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
8,000/.7 - 8,000 = 3,428 unit ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

To convert variable costing net income to absorption costing net income, the fixed production cost in ending inventory and ___ the fixed production cost in beginning inventory.

Correct Answer
verified

Correct Answer
verified