Exam 9: Inventory Costing and Capacity Analysis

When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that ________.

Which of the following steps can a management take to reduce the undesirable effects of absorption costing?

Freetown Corporation incurred fixed manufacturing costs of $30,000 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. Fixed manufacturing costs included in ending inventory total ________. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

The downward demand spiral happens when a company cannot meet competitors prices are not met as because of underutilzied capacity, higher and higher unit costs result is a greater reluctance to meet competitors' prices.

Using master-budget capacity to allocate budgeted fixed manufacturing costs can result in a

In planning and control of capacity costs, managers must consider possible capacity measures. Which of the following measures the available supply of capacity in a factory?

Explain three methods under absorption costing that managers can use to improve operating income.

Which of the following best describes how fixed cost are treated in a variable cost method?

The proration approach restates only the ending balances of two inventory accounts: work-in-process and finished goods, to what they would have been if actual rates had been used.

How does the capacity level chosen to compute the budgeted fixed overhead cost rate affect the production-volume variance?

Jean Peck's Furniture manufactures tables for hospitality sector. It takes only bulk orders and each table is sold for $500 after negotiations. In the month of January, it manufactures 3,100 tables and sells 2,700 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 400 units. The company also incurs a sales commission of $13 per unit. What is the gross margin when using absorption costing? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

Top management at Gifford manufacturing are planning capacity levels and how to assign capacity costs for an upcoming period. Which of the following factors should be considered while developing this plan so that proper control can be achieved?

A company may use absorption costing for external reporting and still choose to use throughput costing for internal reports.

Using ________ as the denominator level also gives the manager a more accurate idea of the resources needed and used to produce a unit by excluding the cost of unused capacity.

The effect of spreading fixed manufacturing costs over a shrinking master-budget capacity utilization amount results in ________.

Throughput margin equals revenues minus all product costs.

________ is the level of capacity based on producing at full efficiency all the time.

Aspen Popular Company prepared the following absorption-costing income statement for the year ended May 31, 2017. Additional information follows: Selling and administrative expenses include $1.50 of variable cost per unit sold. There was no beginning inventory, and 8,750 units were produced. Variable manufacturing costs were $11 per unit. Actual fixed costs were equal to budgeted fixed costs Required: Prepare a variable-costing income statement for the same period.

Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles) for external financial reporting?

Patota Manufacturing incurred the following expenses during 2017: What is the breakeven point in units using absorption costing if the units produced are actually 2,220? (Round your final answer up to the next whole unit.)