Exam 9: Inventory Costing and Capacity Analysis

At the end of the accounting period, Armstrong Corporation reports operating income of $30,000. Which of the following statements is true, if Armstrong's inventory levels decrease during the accounting period?

Under absorption costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

The unit cost of a product is always higher in variable costing than in absorption costing.

Freetown Corporation incurred fixed manufacturing costs of $34,000 during 2017. Other information for 2017 includes: The budgeted denominator level is 2,000 units. Units produced total 1,800 units. Units sold total 1,300 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. Operating income using absorption costing will be ________ than operating income if using variable costing. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

________ are subtracted from sales to calculate gross margin.

Variable costing only includes direct manufacturing costs in inventoriable costs.

AAA Manufacturing Inc, makes a product with the following costs per unit: Direct materials $180 Direct labor $20 Manufacturing overhead (variable) $30 Manufacturing overhead (fixed) $130 Marketing costs $75 What would be the inventoriable cost per unit under variable costing and what would it be under absorption costing?

If 800 units are produced and 1,200 units are sold, the costing method which will result in the greatest operating income is ________.

Assume a manufacturing company that has started production in the current year. Which of the following would result in the highest profit being reported if the company has 1,000 units of ending inventory?

Explain the difference between the gross margin format and the contribution margin format for the income statement. What information is highlighted with each?

Which of the following is true about what the Internal Revenue Service requires for calculating indirect manufacturing costs per unit?

Both theoretical capacity and master-budget capacity measure capacity levels in terms of demand for the output of the plant.

Engineering and human resource factors are both important when estimating theoretical or practical capacity.

Fast Track Auto produces and sells an auto part for $60 per unit. In 2017, 120,000 parts were produced and 75,000 units were sold. Other information for the year includes: What is the inventoriable cost per unit using variable costing?

Answer the following question using the information below: Jason Novelty Company produces a specialty item. Management has provided the following information: What is the cost per unit if throughput costing is used?

Throughput costing provides less incentive to produce for inventory than either variable costing or, especially, absorption costing.

Venus Corporation incurred fixed manufacturing costs of $4,800 during 2017. Other information for 2017 includes: The budgeted denominator level is 1,600 units. Units produced total 770 units. Units sold total 630 units. Beginning inventory was zero. The company uses variable costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. Operating income using variable costing will be ________ than operating income if using absorption costing.

The contribution-margin format of the income statement distinguishes manufacturing costs from nonmanufacturing costs.

Glossier Images Inc., produces decorative statues. Management has provided the following information: What is the cost per statue if throughput costing is used?

Which of the following assumes that capacity will be decreased because of slowdowns due to plant maintenance or other interruptions of the production lines?