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Ending Inventory, Contribution Margin, and Net Income

Question 19: A company has fixed manufacturing costs of $400,000 and produces 100,000 units and sells 85,000 units. There is no beginning inventory. Which of the following conclusions can be drawn?

A Variable costing income will be $60,000 higher than full costing income.

B Full costing income will be $60,000 higher than variable costing income.

C Variable and full costing income will be the same.

D There is not enough information to draw a conclusion.

Question 20: Data from The William Company for 2008 is as follows:

The company produced 148,000 units during the year and sold 120,000 units. Variable production costs and fixed costs have remained constant all year. Net income for the year was $900,000. What was the company?s contribution margin?

A $2,205,000

B $1,305,000

C $1,003,000

D $1,095,000

Question 21: Last month, PeeWee Company manufactured 20,000 units and sold 18,000 of these units at a price of $8.00 per unit. Manufacturing costs consisted of direct labor, $30,000; direct materials, $32,000; variable manufacturing overhead, $3,600; fixed manufacturing overhead, $21,600. Selling and administrative costs totaled $24,000.

What is PeeWee?s net income using variable costing?

A $48,800

B $32,800

C $41,520

D $39,360

Question 22: The Landes Excavating Company experienced the following costs in 2007:

During the year the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65 what is the company?s contribution margin per unit?

A $16.40

B $15.65

C $18.90

D $13.65

Question 23: Pteri Manufacturing makes a single product - the Pteri. Information for 2005 appears below:

What will the ending inventory value in total be using variable costing?

A $250,000

B $50,000

C $65,000

D $0

Question 24: The Jefferson Supply Company experienced the following costs in 2007:

During the year the company manufactured 92,000 units and sold 85,000 units. If the average selling price per unit was $19.50 what was the company?s contribution margin?

A $1,007,250

B $824,500

C $987,250

D $789,500

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