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Activity Cost Pool - Absorption and Variable Costing

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Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:

A. variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs
B. variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs
C. variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs
D. variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs

4. Kuzio Corporation produces and sells a single product. Data concerning that product appear below:
Per Unit Percent of Sales
Selling price.......................$130 100%
Variable expenses.............. 78 60%
Contribution margin.......... $52 40%

The company is currently selling 6,000 units per month. Fixed expenses are $263,000 per month. The marketing manager believes that a $5,000 increase in the monthly advertising budget would result in a 140 unit increase in monthly sales. What should be the overall effect on the company's monthly net operating income of this change?

A. increase of $2,280
B. increase of $7,280
C. decrease of $5,000
D. decrease of $2,280

15. Eccles Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system.
Costs:
Wages and salaries............ $340,000
Depreciation...................... 180,000
Utilities.............................. 200,000
Total.................................. $720,000

Distribution of resource consumption:
Activity Cost Pools
Assembly Setting Up Other Total
Wages and salaries 20% 60% 20% 100%
Depreciation 15% 35% 50% 100%
Utilities 5% 55% 40% 100%
How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool

A. $144,000
B. $96,000
C. $36,000
D. $105,000

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The solution explains multiple choice questions relating to absorption, variable costing and activity based costing

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1. This is D. In variable costing all variable manufacturing cost is product cost. In absorption costing in addition to variable ...

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