Question 1

MATCHING
-May be used in a manufacturing company.

Accepted Answer

A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing 
A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing

Question 2

Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affect the amount of income from operations reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 3

On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is the:

Accepted Answer

A)  fixed manufacturing costs 
B)  variable cost of goods sold 
C)  fixed selling and administrative expenses 
D)  variable selling and administrative expenses 
A)  fixed manufacturing costs 
B)  variable cost of goods sold 
C)  fixed selling and administrative expenses 
D)  variable selling and administrative expenses

Question 4

A business operated at 100% of capacity during its first month and incurred the following costs:   If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

Accepted Answer

A)  $24,300 
B)  $28,200 
C)  $22,800 
D)  $34,000 
A)  $24,300 
B)  $28,200 
C)  $22,800 
D)  $34,000

Question 5

A business operated at 100% of capacity during its first month, with the following results:   Operating expenses:  
-What is the amount of the contribution margin that would be reported on the variable costing income statement?

Accepted Answer

A)  $34,200 
B)  $20,200 
C)  $29,700 
D)  $26,200 
A)  $34,200 
B)  $20,200 
C)  $29,700 
D)  $26,200

Question 6

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each), the effect of the quantity factor on the change in contribution margin is:

Accepted Answer

A)  $5,000 decrease 
B)  $5,000 increase 
C)  $5,750 increase 
D)  $5,750 decrease 
A)  $5,000 decrease 
B)  $5,000 increase 
C)  $5,750 increase 
D)  $5,750 decrease

Question 7

The contribution margin ratio is computed as:

Accepted Answer

A)  sales divided by contribution margin 
B)  contribution margin divided by sales 
C)  contribution margin divided by cost of sales 
D)  contribution margin divided by variable cost of sales 
A)  sales divided by contribution margin 
B)  contribution margin divided by sales 
C)  contribution margin divided by cost of sales 
D)  contribution margin divided by variable cost of sales

Question 8

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

Accepted Answer

A) True 
 B)False

Question 9

Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because

Accepted Answer

A)  by using the absorption costing method, income could appear to be higher by producing more inventory. 
B)  by using the absorption costing method, income could appear to be lower by producing more inventory. 
C)  by using the variable costing method, the cost of goods sold will be higher as more units are manufactured and sales remain the same. 
D)  by using the variable costing method, all fixed and variable costs are included in the unit cost of the product manufactured. 
A)  by using the absorption costing method, income could appear to be higher by producing more inventory. 
B)  by using the absorption costing method, income could appear to be lower by producing more inventory. 
C)  by using the variable costing method, the cost of goods sold will be higher as more units are manufactured and sales remain the same. 
D)  by using the variable costing method, all fixed and variable costs are included in the unit cost of the product manufactured.

Question 10

Variable costing is also known as direct costing.

Accepted Answer

A) True 
 B)False

Question 11

In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the changes in various activities.

Accepted Answer

A) True 
 B)False

Question 12

A business operated at 100% of capacity during its first month and incurred the following costs:   If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

Accepted Answer

A)  $41,500 
B)  $36,000 
C)  $42,800 
D)  $38,500 
A)  $41,500 
B)  $36,000 
C)  $42,800 
D)  $38,500

Question 13

Under variable costing, which of the following costs would not be included in finished goods inventory?

Accepted Answer

A)  direct labor cost 
B)  direct materials cost 
C)  variable factory overhead cost 
D)  fixed factory overhead cost 
A)  direct labor cost 
B)  direct materials cost 
C)  variable factory overhead cost 
D)  fixed factory overhead cost

Question 14

For a period during which the quantity of inventory at the end equals the inventory at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 15

For a period during which the quantity of product manufactured was less than the quantity sold, income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

Accepted Answer

A) True 
 B)False

Question 16

Management should focus its sales and production efforts on the product or products that will provide

Accepted Answer

A)  the highest sales revenue 
B)  the lowest product costs 
C)  the maximum contribution margin 
D)  the lowest direct labor hours 
A)  the highest sales revenue 
B)  the lowest product costs 
C)  the maximum contribution margin 
D)  the lowest direct labor hours

Question 17

Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?

Accepted Answer

A)  only variable costing 
B)  only absorption costing 
C)  both variable and absorption costing 
D)  neither variable nor absorption costing 
A)  only variable costing 
B)  only absorption costing 
C)  both variable and absorption costing 
D)  neither variable nor absorption costing

Question 18

Philadelphia Company has the following information for March:   Determine the March a) manufacturing margin, b) contribution margin, and c) income from operations for Philadelphia Company.

Accepted Answer

a) $210,000 $450,000 - $240,00

Question 19

Under absorption costing, the amount of income reported from operations can be increased by producing more units than are sold.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following isare) reasons) for easy identification and control of variable manufacturing costs under the variable costing method?

Accepted Answer

A)  variable and fixed costs are reported separately. 
B)  variable costs can be controlled by the operating management. 
C)  fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. 
D)  All of the above are true. 
A)  variable and fixed costs are reported separately. 
B)  variable costs can be controlled by the operating management. 
C)  fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. 
D)  All of the above are true.

Exam 20: Variable Costing for Management Analysis

MATCHING -May be used in a manufacturing company.

Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affect the amount of income from operations reported under absorption costing.

On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is the:

A business operated at 100% of capacity during its first month and incurred the following costs: If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

A business operated at 100% of capacity during its first month, with the following results: Operating expenses: -What is the amount of the contribution margin that would be reported on the variable costing income statement?

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each), the effect of the quantity factor on the change in contribution margin is:

The contribution margin ratio is computed as:

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because

Variable costing is also known as direct costing.

In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the changes in various activities.

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

Under variable costing, which of the following costs would not be included in finished goods inventory?

For a period during which the quantity of inventory at the end equals the inventory at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

For a period during which the quantity of product manufactured was less than the quantity sold, income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

Management should focus its sales and production efforts on the product or products that will provide

Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?

Philadelphia Company has the following information for March: Determine the March a) manufacturing margin, b) contribution margin, and c) income from operations for Philadelphia Company.

Under absorption costing, the amount of income reported from operations can be increased by producing more units than are sold.

Which of the following isare) reasons) for easy identification and control of variable manufacturing costs under the variable costing method?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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