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Variable costing and absorption costing

Name: Questions on: variable costing, absorption costing
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Abbey Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $129

Units in beginning inventory 0
Units produced 6,300
Units sold 6,100
Units in ending inventory 200

Variable costs per unit:
Direct materials $32
Direct labor $50
Variable manufacturing overhead $5
Variable selling and administrative $11

Fixed costs:
Fixed manufacturing overhead $88,200
Fixed selling and administrative $97,600

1. What is the unit product cost for the month under variable costing?
A) $87
B) $101
C) $112
D) $98

2. What is the unit product cost for the month under absorption costing?
A) $101
B) $98
C) $87
D) $112

3. The total gross margin for the month under the absorption costing approach is:
A) $189,100
B) $6,100
C) $170,800
D) $191,000

4. What is the total period cost for the month under the variable costing approach?
A) $252,900
B) $164,700
C) $88,200
D) $185,800

5. What is the net operating income for the month under variable costing?
A) $3,300
B) $2,800
C) ($14,100)
D) $6,100

The solution examines variable costing and absorption costing.

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