Question 1

Beginning inventory + cost of goods manufactured = Cost of goods sold + Ending inventory.

Accepted Answer

A) True 
 B)False

Question 2

Absorption costing is also referred to as super-variable costing.

Accepted Answer

A) True 
 B)False

Question 3

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.

Accepted Answer

A)  real available capacity 
B)  an unattainable and idealistic level of capacity 
C)  normal capacity utilization 
D)  normal costing 
A)  real available capacity 
B)  an unattainable and idealistic level of capacity 
C)  normal capacity utilization 
D)  normal costing

Question 4

Jarvis Golf Company sells a special putter for $20 each. In March, it sold 28,000 putters while manufacturing 30,000. There was no beginning inventory on March 1. Production information for March was:
   
Required:
a.Compute the cost per unit under both absorption and variable costing.
b.Compute the ending inventories under both absorption and variable costing.
c.Compute operating income under both absorption and variable costing.

Accepted Answer

The answer of Jarvis Golf Company sells a special putter...

Question 5

Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?

Accepted Answer

No, companies in this situation might ex

Question 6

Ways to "produce for inventory" that result in increasing operating income include ________.

Accepted Answer

A)  switching production to products that absorb the least amounts of fixed manufacturing costs 
B)  delaying items that absorb the greatest amount of fixed manufacturing costs 
C)  switching production to products that absorb the most amounts of fixed manufacturing costs 
D)  undervaluing ending inventory by not recording certain costs that have been incurred 
A)  switching production to products that absorb the least amounts of fixed manufacturing costs 
B)  delaying items that absorb the greatest amount of fixed manufacturing costs 
C)  switching production to products that absorb the most amounts of fixed manufacturing costs 
D)  undervaluing ending inventory by not recording certain costs that have been incurred

Question 7

Advocates of throughput costing argue that ________.

Accepted Answer

A)  fixed manufacturing costs must be included as inventoriable costs and provide less incentive than absorption costing to build-up inventory to increase profits 
B)  direct manufacturing labor is relatively fixed and therefore should not be included in inventory costs 
C)  direct materials costs are a cost of the period and therefore should not be included in inventoriable costs 
D)  including only direct materials as inventoriable costs provides less incentive than absorption costing to produce a build-up of inventory merely to increase profits 
A)  fixed manufacturing costs must be included as inventoriable costs and provide less incentive than absorption costing to build-up inventory to increase profits 
B)  direct manufacturing labor is relatively fixed and therefore should not be included in inventory costs 
C)  direct materials costs are a cost of the period and therefore should not be included in inventoriable costs 
D)  including only direct materials as inventoriable costs provides less incentive than absorption costing to produce a build-up of inventory merely to increase profits

Question 8

Which of the following measures capacity levels in terms of demand for the output of the plant?

Accepted Answer

A)  practical capacity and theoretical capacity 
B)  theoretical capacity and normal capacity utilization 
C)  normal capacity utilization and master-budget capacity utilization 
D)  master-budget capacity utilization and practical capacity 
A)  practical capacity and theoretical capacity 
B)  theoretical capacity and normal capacity utilization 
C)  normal capacity utilization and master-budget capacity utilization 
D)  master-budget capacity utilization and practical capacity

Question 9

Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

Accepted Answer

A)  master-budget capacity utilization to highlight unused capacity 
B)  normal capacity utilization for benchmarking purposes 
C)  practical capacity for pricing decisions 
D)  theoretical capacity for performance evaluation 
A)  master-budget capacity utilization to highlight unused capacity 
B)  normal capacity utilization for benchmarking purposes 
C)  practical capacity for pricing decisions 
D)  theoretical capacity for performance evaluation

Question 10

Glossier Images Inc., produces decorative statues. Management has provided the following information:
 
What is the total throughput contribution?

Accepted Answer

A)  $2,100,600 
B)  $1,233,750 
C)  $1,361,500 
D)  $1,029,000 
A)  $2,100,600 
B)  $1,233,750 
C)  $1,361,500 
D)  $1,029,000

Question 11

Freetown Corporation incurred fixed manufacturing costs of $26,000 during 2017. Other information for 2017 includes:
The budgeted denominator level is 2,600 units.
Units produced total 1,800 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
The production-volume variance is ________. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A)  $6,000 
B)  $8,000 
C)  $14,000 
D)  $0 
A)  $6,000 
B)  $8,000 
C)  $14,000 
D)  $0

Question 12

Usually there is no production-volume variance when normal capacity utilization is used as the denominator level.

Accepted Answer

A) True 
 B)False

Question 13

Yellow Mountain Manufacturing factors practical capacity as a denominator to calculate budgeted fixed overhead. Theoretical capacity is 12,000 units per year with practical capacity of 9,000 units per year. Budgeted fixed overhead costs were $690,000 and actual overhead costs were $730,000 with actual output of 8,000 units. Which of the following statements is true?

Accepted Answer

A)  The budgeted cost per unit of supplying the capacity was $86.25 
B)  The actual cost of supplying capacity was $76.67 per unit 
C)  The budgeted cost of supplying the capacity was $76.67 per unit 
D)  The budgeted cost of supplying the capacity was $57.50 per unit. 
A)  The budgeted cost per unit of supplying the capacity was $86.25 
B)  The actual cost of supplying capacity was $76.67 per unit 
C)  The budgeted cost of supplying the capacity was $76.67 per unit 
D)  The budgeted cost of supplying the capacity was $57.50 per unit.

Question 14

What is throughput costing? What advantages does it have over variable and absorption costing?

Accepted Answer

Throughput costing is an inventory metho

Question 15

Practical capacity rather than master-budget volume is a better way to price product and avoid downward demand spiral.

Accepted Answer

A) True 
 B)False

Question 16

Henry Chapman Manufacturing Inc. incurred the following expenses during 2017:
 
What will be the breakeven point in units if absorption costing is used? (Round your final answer up to the next whole unit.)

Accepted Answer

A)  997 units 
B)  934 units 
C)  810 units 
D)  524 units 
A)  997 units 
B)  934 units 
C)  810 units 
D)  524 units

Question 17

Jean Peck's Furniture manufactures tables for hospitality sector. It takes only bulk orders and each table is sold for $400 after negotiations. In the month of January, it manufactures 3,200 tables and sells 2,400 tables. Actual fixed costs are the same as the amount of fixed costs budgeted for the month.
The following information is provided for the month of January:
 
At the end of the month Jean Peck's Furniture has an ending inventory of finished goods of 800 units. The company also incurs a sales commission of $11 per unit.
What is the cost of goods sold per unit when using absorption costing?

Accepted Answer

A)  $130.00 
B)  $101.87 
C)  $158.13 
D)  $169.13 
A)  $130.00 
B)  $101.87 
C)  $158.13 
D)  $169.13

Question 18

Jupiter Corporation incurred fixed manufacturing costs of $18,000 during 2017. Other information for 2017 includes:
The budgeted denominator level is 2,400 units.
Units produced total 2,700 units.
Units sold total 1,900 units.
Variable cost per unit is $4
Beginning inventory is zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.
Under absorption costing, total manufacturing costs expensed on the income statement (excluding adjustments for variances) total ________. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Accepted Answer

A)  $31,050 
B)  $21,850 
C)  $25,050 
D)  $14,250 
A)  $31,050 
B)  $21,850 
C)  $25,050 
D)  $14,250

Question 19

Hyland Resources Inc. uses practical capacity as the denominator to set the cost of supplying capacity and for the current period the budgeted cost per unit of supplying capacity was $44. Practical capacity was set at 14,000 units with theoretical capacity at 20,000 units. During the period, only 11,000 units were produced while the master budget assumed that the company would produce 13,000 units. What is value of the manufacturing resources not used during the period?

Accepted Answer

A)  $132,000 
B)  $308,000 
C)  $396,000 
D)  $44,000 
A)  $132,000 
B)  $308,000 
C)  $396,000 
D)  $44,000

Question 20

When production is less than sales, operating income will be the same regardless of whether variable cost or absorption costing is used.

Accepted Answer

A) True 
 B)False

Beginning inventory + cost of goods manufactured = Cost of goods sold + Ending inventory.

Absorption costing is also referred to as super-variable costing.

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.

Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?

Ways to "produce for inventory" that result in increasing operating income include ________.

Advocates of throughput costing argue that ________.

Which of the following measures capacity levels in terms of demand for the output of the plant?

Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

Glossier Images Inc., produces decorative statues. Management has provided the following information: What is the total throughput contribution?

Usually there is no production-volume variance when normal capacity utilization is used as the denominator level.

What is throughput costing? What advantages does it have over variable and absorption costing?

Practical capacity rather than master-budget volume is a better way to price product and avoid downward demand spiral.

Henry Chapman Manufacturing Inc. incurred the following expenses during 2017: What will be the breakeven point in units if absorption costing is used? (Round your final answer up to the next whole unit.)

When production is less than sales, operating income will be the same regardless of whether variable cost or absorption costing is used.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 9: Inventory Costing and Capacity Analysis

Beginning inventory + cost of goods manufactured = Cost of goods sold + Ending inventory.

Absorption costing is also referred to as super-variable costing.

The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.

Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?

Ways to "produce for inventory" that result in increasing operating income include ________.

Advocates of throughput costing argue that ________.

Which of the following measures capacity levels in terms of demand for the output of the plant?

Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

Glossier Images Inc., produces decorative statues. Management has provided the following information: What is the total throughput contribution?

Usually there is no production-volume variance when normal capacity utilization is used as the denominator level.

What is throughput costing? What advantages does it have over variable and absorption costing?

Practical capacity rather than master-budget volume is a better way to price product and avoid downward demand spiral.

Henry Chapman Manufacturing Inc. incurred the following expenses during 2017: What will be the breakeven point in units if absorption costing is used? (Round your final answer up to the next whole unit.)

When production is less than sales, operating income will be the same regardless of whether variable cost or absorption costing is used.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters