Variable Costing methods and calculations

20 questions

Tables for questions 5 - 11 - 12 - 15 - 19 in attachment

Question 1

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.
Question 1 answers
True
False

Question 2

When evaluating a special order, management should
Question 2 answers
Only accept the order if the incremental revenue exceeds all product costs.
Only accept the order if the incremental revenue exceeds fixed product costs.
Only accept the order if the incremental revenue exceeds total variable product costs.
Only accept the order if the incremental revenue exceeds full absorption product costs.
Only accept the order if the incremental revenue exceeds regular sales revenue.

Question 3

Sales less variable costs equals manufacturing margin.
Question 3 answers
True
False

Question 4

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared using a contribution format.
Question 4 answers
True
False

Question 5

Given the following data, total product cost per unit under variable costing is $10.75.

Question 5 answers
True
False

Question 6

During a given year, if a company produces more units than it sells, then ending inventory units will be less than beginning inventory units.
Question 6 answers
True
False

Question 7

Which of the following is not a product cost?
Question 7 answers
Direct labor.
Indirect manufacturing costs.
Direct materials.
Manufacturing overhead.
All of the items listed above are product costs.

Question 8

Dent Corporation had net income of $182,000 based on variable costing. Beginning and ending inventories were 5,000 units and 8,000 units, respectively. Assume the fixed overhead per unit was $3 for both the beginning and ending inventory. What is net income under absorption costing?
Question 8 answers
$173,000.
$221,000.
$191,000.
$143,000.
$185,000.

Question 9

Which of the following best describes costs assigned to the product under the variable costing method?
Direct labor
Direct materials
Variable selling and administrative
Variable manufacturing overhead
Fixed selling and administrative
Fixed manufacturing overhead
Question 9 answers
All of the above costs.
Direct labor, direct materials, and variable manufacturing overhead.
Direct labor, direct materials, variable manufacturing overhead, and fixed manufacturing overhead.
Direct labor and direct materials.
Direct labor, direct materials, fixed selling and administrative, and fixed manufacturing overhead.

Question 10

Front Company had net income of $72,500 based on variable costing. Beginning and ending inventories were 800 units and 1,200 units, respectively. Assume the fixed overhead per unit was $7.90 for both the beginning and ending inventory. What is net income under absorption costing?
Question 10 answers
$69,340.
$75,660.
$88,300.
$56,700.
$72,900.

Question 11

Scavenger Company, a manufacturer of recycling bins, began operations on January 1 of the current year. During this time, the company produced 60,000 units and sold 55,000 units at a sales price of $15 per unit. Cost information for this year is shown below.

Reference: 19_03

Given the Scavenger Company data, what is net income using variable costing?
Question 11 answers
$201,250.
$181,250.
$150,000.
$177,600.
$276,250.

Question 12

Swola Company reports the following annual cost data for its single product.

This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing?
Question 12 answers
$187,500 increase.
$112,500 increase.
$300,000 increase.
$112,500 decrease.
$187,500 decrease.

Question 13

Given the following data, total product cost per unit under absorption costing will be $400 greater than total product cost per unit under variable costing.

Question 13 answers
True
False

Question 14

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.
Question 14 answers
True
False

Question 15

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.

Reference: 19_01

Given Advanced Company's data, compute cost per unit of finished goods under absorption costing.
Question 15 answers
$20.00.
$34.17.
$25.32.
$23.00.
$28.50.

Question 16

Variable costing treats fixed overhead cost as a period cost.
Question 16 answers
True
False

Question 17

The use of absorption costing can result in misleading product cost information.
Question 17 answers
True
False

Question 18

Cost information from both absorption costing and variable costing can aid managers in pricing.
Question 18 answers
True
False

Question 19

Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end the company reported the following income statement using absorption costing.

Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced). Fifteen percent of total selling and administrative expenses are variable.
Compute net income under variable costing.
Question 19 answers
$146,500.
$158,500.
$237,500.
$206,500.
$246,500.

Question 20 text Question 20

When units produced are less than units sold, income under absorption costing is higher than income under variable costing.
Question 20 answers
True
False