Exam 9: Inventory Costing and Capacity Analysis

Jenkins Corporation sells one product. The following information is available for the current month: What is the absorption costing breakeven point in units? (Round your final answer up to the next whole unit.)

Francis Corporation is having trouble selling its inventory because of its ongoing dispute with its logistical partner. The company was not able to sell any inventory in the month of January because of the dispute. It manufactured 8,000 units in January. Francis had no other fixed costs commitment other than fixed manufacturing costs of $100,000. It follows absorption costing. If actual production in January was equal to the denominator level, what is the amount of sales required to attain breakeven point?

Which of the following is not one of the reasons why absorption costing might also be used for internal reporting?

Explain the three alternative approaches to dispose of the production-volume variance.

Variable costing is also called direct costing because it considers other nonmanufacturing direct costs, such as direct marketing costs as inventoriable costs.

U.S. tax reporting requires end-of-period reconciliation between actual and applied indirect costs using the adjusted allocation-rate method or the proration method.

It is most difficult to estimate ________ because of the need to predict demand for the next few years.

Garfield Company has the following information for the current year: What is the difference between operating incomes under absorption costing and variable costing?

Under absorption costing, fixed manufacturing costs ________.

Under variable costing, lease charges paid on the factory building is an inventoriable cost.

Which of the following is true of absorption costing?

The production-volume variance only exists under variable costing and not under absorption costing.

Absorption-costing income statements usually do not differentiate between variable and fixed costs.

Which of the following is true of master-budget capacity utilization?

Which of the following would not lead to a build up inventory as a strategy to increase operating income?

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

When production is greater than sales, operating income under variable costing will be less than what it would be under absorption costing.

Product-sustaining costs in activity-based costing are similar to ________.

Given a constant contribution margin per unit and constant fixed costs, the period-to-period change in operating income under variable costing is driven solely by ________.

Raul Technologies is concerned that increased sales did not result in increased profits for 2018. Both variable unit and total fixed manufacturing costs for 2017 and 2018 remained constant at $35 and $3,500,000, respectively. In 2017, the company produced 100,000 units and sold 80,000 units at a price of $87.50 per unit. There was no beginning inventory in 2017. In 2018, the company made 70,000 units and sold 90,000 units at a price of $87.50. Selling and administrative expenses were all fixed at $350,000 each year. Required: a.Prepare income statements for each year using absorption costing. b.Prepare income statements for each year using variable costing. c.Explain why the income was different each year using the two methods. Show computations.