Exam 6: Variable Costing and Analysis

Swisher, Incorporated reports the following annual cost data for its single product: This product is normally sold for $48 per unit. If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's income increase or decrease under variable costing?

When units produced are less than units sold, income under absorption costing is higher than income under variable costing.

Hayes Inc. provided the following information for the current year: What is the unit product cost for the year using variable costing?

A company is currently operating at 70% capacity producing 8,000 units. Cost information relating to this current production is shown in the following table: The company has been approached by a customer with a request for a special order for 1,500 units. The sales price per unit for this special order is $10. Should the company accept the special order?

What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?

Mentor Corp. has provided the following information for the current year: Calculate the unit product cost using variable costing.

A per unit cost that is constant at all production levels is a ________ cost per unit.

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $250,000. The company produced 25,000 units, and sold 20,000 units, leaving 5,000 units in inventory at year-end. What is the value of ending inventory under variable costing?

Contribution margin is another way to refer to gross margin.

Dataport Company reports the following annual cost data for its single product: This product is normally sold for $230 per unit. If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

Under absorption costing, a company had the following unit costs when 9,000 units were produced. Compute the total product cost per unit under absorption costing if 25,000 units had been produced.

Swola Company reports the following annual cost data for its single product. This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's income increase or decrease under absorption costing?

Given the following data, calculate product cost per unit under variable costing.

Shore Company reports the following information regarding its production cost. Compute product cost per unit under absorption costing.

Variable costing treats fixed overhead cost as a period cost.

Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. At year-end, the company reported the following income statement using absorption costing. Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced). Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.

Fanelli Company had net income of $678,000 based on variable costing. Beginning and ending inventories were 5,000 units and 4,200 units, respectively. Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory. What is net income under absorption costing?

The data needed for cost-volume-profit analysis is readily available if the income statement is prepared under absorption costing.

Geneva Company manufactures dolls that are sold to various customers. The company works at full capacity for half the year to meet peak demand, and operates at 80% capacity for the other half of the year. The following information is provided: Geneva receives a purchase order to make 5,000 dolls as a one-time event. The good news is that this order is during a period when Geneva does have excess capacity. What is the lowest selling price Geneva should accept for this purchase order?

Kluber, Inc. had net income of $900,000 based on variable costing. Beginning and ending inventories were 55,000 units and 52,000 units, respectively. Assume the fixed overhead per unit was $1.25 for both the beginning and ending inventory. What is net income under absorption costing?