Question 1

Generally Accepted Accounting Principles require the use of direct costing for financial reporting purposes.

Accepted Answer

A) True 
 B)False  False

Question 2

The sum of unit variable and fixed costs are used as a basis for determining whether to accept or reject a special order.

Accepted Answer

A) True 
 B)False  False

Question 3

Using the given information,determine the income under both the absorption and the direct (variable)costing methods for CRL Company this year.Explain the difference,if any.

Accepted Answer

CRL Company income under absorption costing is $125,730 and under direct costing it is $119,080.The difference is the $4.75 per unit fixed manufacturing cost times the 1,400 units in ending inventory ($6,650)that is in ending inventory and not on the income statement under absorption costing.

Question 4

The following information relates to the purchase of new machine being considered.   The new machine would enable the company to make 13,500 units per year.The current capacity of 12,000 is based on the maximum number of units that the old machine can produce.The company has had to turn down orders in the past few years due to this limit on capacity and estimates that it can sell as many of the product as it can produce.The sales price per unit of the product is $34.50.Determine the relevant data.Pose one addition consideration regarding this decision.

Accepted Answer

@#IMG-DLM& Income will be $375 less with the new m

Question 5

The profitability of a segment is judged by its contribution margin.

Accepted Answer

A) True 
 B)False

Question 6

Using direct costing,the manufacturing margin is:

Accepted Answer

A)  $550,000 
B)  $540,000 
C)  $480,000 
D)  $450,000 
A)  $550,000 
B)  $540,000 
C)  $480,000 
D)  $450,000

Question 7

Green Manufacturing makes 30,000 units per year of a part used in the manufacture of its new camcorder.An outside supplier has offered to sell Green all of these parts for $48 a unit.If the parts were purchased from the supplier,all of the direct labor costs would be avoided as well as $5 of manufacturing overhead costs per unit.Product cost information for the part under review follows:   How much of the unit product cost is relevant in the decision of whether to make or buy the part?

Accepted Answer

A)  $15. 
B)  $25. 
C)  $40. 
D)  $45. 
A)  $15. 
B)  $25. 
C)  $40. 
D)  $45.

Question 8

In deciding whether to manufacture or to purchase a product,____________________ costs are generally ignored.

Accepted Answer

The answer of In deciding whether to manufacture or to...

Question 9

The difference in cost between one alternative and another is called a(n)____________________ cost.

Accepted Answer

The answer of The difference in cost between one alternative...

Question 10

If a decision must be made to replace a machine,the book value of the existing machine is a sunk cost.

Accepted Answer

A) True 
 B)False

Question 11

The difference between revenue and variable costs is referred to as the ___________________.

Accepted Answer

The answer of The difference between revenue and variable costs...

Question 12

Which of the following is not true of the direct costing procedure?

Accepted Answer

A)  Variable and fixed costs are considered as part of the cost of goods manufactured. 
B)  The cost of goods sold,based solely on variable costs,is subtracted from net sales to arrive at the manufacturing margin. 
C)  Variable selling expenses are deducted from the manufacturing margin. 
D)  Variable administrative expenses are deducted from the manufacturing margin. 
A)  Variable and fixed costs are considered as part of the cost of goods manufactured. 
B)  The cost of goods sold,based solely on variable costs,is subtracted from net sales to arrive at the manufacturing margin. 
C)  Variable selling expenses are deducted from the manufacturing margin. 
D)  Variable administrative expenses are deducted from the manufacturing margin.

Question 13

If the finished goods inventory decreases during the period,the reported net income will be larger under variable costing than under absorption costing.

Accepted Answer

A) True 
 B)False

Question 14

If a segment of a business is expected to produce an annual contribution margin of $30,000 but is also expected to incur controllable fixed costs of about $40,000 annually,that segment should probably be discontinued.

Accepted Answer

A) True 
 B)False

Question 15

On an income statement prepared with a direct costing approach,the excess of sales over the cost of goods sold,based on variable costs only,is referred to as

Accepted Answer

A)  the marginal gross profit on sales. 
B)  the manufacturing margin. 
C)  the marginal income on sales. 
D)  the contribution margin. 
A)  the marginal gross profit on sales. 
B)  the manufacturing margin. 
C)  the marginal income on sales. 
D)  the contribution margin.

Question 16

Segment managers can never control fixed costs.

Accepted Answer

A) True 
 B)False

Question 17

Costs that are not directly traceable to any specific department are called ____________________ costs.

Accepted Answer

The answer of Costs that are not directly traceable to...

Question 18

Under absorption costing,a portion of the fixed manufacturing overhead is deferred to future periods as part of the inventory value.

Accepted Answer

A) True 
 B)False

Question 19

Timkon Manufacturing has provided the following operating results for its recent operations:   Using the direct method,cost of goods manufactured for the year is:

Accepted Answer

A)  $200,000 
B)  $230,000 
C)  $300,000 
D)  $330,000 
A)  $200,000 
B)  $230,000 
C)  $300,000 
D)  $330,000

Question 20

Using the absorption method,cost of goods manufactured for the year is:

Accepted Answer

A)  $450,000 
B)  $550,000 
C)  $660,000 
D)  $900,000 
A)  $450,000 
B)  $550,000 
C)  $660,000 
D)  $900,000

Exam 30: Cost-Revenue Analysis for Decision Making

Generally Accepted Accounting Principles require the use of direct costing for financial reporting purposes.

The sum of unit variable and fixed costs are used as a basis for determining whether to accept or reject a special order.

Using the given information,determine the income under both the absorption and the direct (variable)costing methods for CRL Company this year.Explain the difference,if any.

The profitability of a segment is judged by its contribution margin.

Using direct costing,the manufacturing margin is:

In deciding whether to manufacture or to purchase a product,____________________ costs are generally ignored.

The difference in cost between one alternative and another is called a(n)____________________ cost.

If a decision must be made to replace a machine,the book value of the existing machine is a sunk cost.

The difference between revenue and variable costs is referred to as the ___________________.

Which of the following is not true of the direct costing procedure?

If the finished goods inventory decreases during the period,the reported net income will be larger under variable costing than under absorption costing.

If a segment of a business is expected to produce an annual contribution margin of $30,000 but is also expected to incur controllable fixed costs of about $40,000 annually,that segment should probably be discontinued.

On an income statement prepared with a direct costing approach,the excess of sales over the cost of goods sold,based on variable costs only,is referred to as

Segment managers can never control fixed costs.

Costs that are not directly traceable to any specific department are called ____________________ costs.

Under absorption costing,a portion of the fixed manufacturing overhead is deferred to future periods as part of the inventory value.

Timkon Manufacturing has provided the following operating results for its recent operations: Using the direct method,cost of goods manufactured for the year is:

Using the absorption method,cost of goods manufactured for the year is:

Accounting: the Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and the Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounting Principles and Reporting Standards

Accounts Receivable and Uncollectible Accounts

Notes Payable and Notes Receivable

Merchandise Inventory

Property, Plant, and Equipment

Accounting for Partnerships

Corporations: Formation and Capital Stock Transactions

Corporate Earnings and Capital Transactions

Long-Term Bonds

Financial Statement Analyses

The Statement of Cash Flows

Departmentalized Profit and Cost Centers

Accounting for Manufacturing Activities

Job Order Cost Accounting

Process Cost Accounting

Controlling Manufacturing Costs: Standard Costs

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