Exam 9: Inventory Costing and Capacity Analysis

When actual production is below practical capacity, there will be unused-capacity cost only in the manufacturing function while unused capacity is not a factor in nonmanufacturing links of the value chair such as in the marketing function.

The contribution-margin format of the income statement is used with absorption costing.

Throughput contribution equals ________.

Which of the following costs is inventoried when using variable costing?

Jupiter Corporation incurred fixed manufacturing costs of $19,000 during 2017. Other information for 2017 includes: The budgeted denominator level is 2,300 units. Units produced total 2,600 units. Units sold total 1,700 units. Variable cost per unit is $6 Beginning inventory is zero. The fixed manufacturing cost rate is based on the budgeted denominator level. Under absorption costing, the production-volume variance is ________. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

To reduce the undesirable incentives to build up inventories management can institute planning, budgeting, and other controls.

Kennywood Inc., a manufacturing firm, is able to produce 1,000 pairs of pants per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 800 units per hour. The plant actually operates only 28 days per month. Based on the current budget, Kennywood estimates that it will be able to sell only 501,000 units due to the entry of a competitor with aggressive marketing capabilities. But the demand is unlikely to be affected in future and will be around 519,000. Assume the month has 30 days. What is the practical capacity for the month?

Throughput is a variation of which of the following systems?

The production-volume variance, which relates only to fixed manufacturing overhead, exists under absorption costing but not under variable costing.

Using master budget capacity as the denominator level sets the cost of capacity at the cost of supplying the capacity, regardless of the demand for the capacity.

Fixed manufacturing overhead is a period cost both under variable costing and under absorption costing.

Adjusted allocation-rate approach restates all amounts in the general and subsidiary ledgers by using actual rather than budgeted cost rates.

Swansea Finishing produces and sells a decorative pillow for $103.00 per unit. In the first month of operation, 2,300 units were produced and 1,800 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: What is cost of goods sold per unit using variable costing?

Ms. Sophia Jones, the company president, has heard that there are multiple breakeven points for every product. She does not believe this and has asked you to provide the evidence of such a possibility. Some information about the company for 2017 is as follows: What are breakeven sales in units using absorption costing? (Round any intermediary calculations to the nearest cent and your final answer up to the next whole unit.)

________ is the level of capacity utilization that managers expect for the current budget period, which is typically one year.

The breakeven points are the same under both variable costing and absorption costing.

Venus Corporation incurred fixed manufacturing costs of $6,600 during 2017. Other information for 2017 includes: The budgeted denominator level is 1,600 units. Units produced total 770 units. Units sold total 600 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. The production-volume variance totals ________.

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

________ method includes fixed manufacturing overhead costs as inventoriable costs.

Time Again, LLC produces and sells a mantel clock for $100 per unit. In 2017, 42,125 clocks were produced and 37,958 were sold. Other information for the year includes: What is the inventoriable cost per unit using variable costing?