Question 1

Given the following data, total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing.

Accepted Answer

A) True 
 B)False

Question 2

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 absorption costing?

Accepted Answer

A)  $60,000 decrease. 
B)  $90,000 decrease. 
C)  There is no change in income. 
D)  $90,000 increase. 
E)  $60,000 increase. 
A)  $60,000 decrease. 
B)  $90,000 decrease. 
C)  There is no change in income. 
D)  $90,000 increase. 
E)  $60,000 increase.

Question 3

Income under absorption costing will always be different than income under variable costing.

Accepted Answer

A) True 
 B)False

Question 4

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Accepted Answer

A) True 
 B)False

Question 5

Reporting contribution margin by market segment is useful in assessing the profitability of each segment.

Accepted Answer

A) True 
 B)False

Question 6

Using absorption costing, which of the following manufacturing costs are assigned to products?

Accepted Answer

A)  Direct materials and direct labor. 
B)  Direct labor and variable manufacturing overhead. 
C)  Fixed manufacturing overhead, direct materials, and direct labor. 
D)  Variable manufacturing overhead, direct materials, and direct labor. 
E)  Variable manufacturing overhead, direct materials, direct labor, and fixed manufacturing overhead. 
A)  Direct materials and direct labor. 
B)  Direct labor and variable manufacturing overhead. 
C)  Fixed manufacturing overhead, direct materials, and direct labor. 
D)  Variable manufacturing overhead, direct materials, and direct labor. 
E)  Variable manufacturing overhead, direct materials, direct labor, and fixed manufacturing overhead.

Question 7

What costs are treated as product costs under the variable costing method?

Accepted Answer

Under variable costing, direct

Question 8

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. Income calculated under variable costing is determined to be $315,000. How much income is reported under absorption costing?

Accepted Answer

A)  $315,000 
B)  $265,000 
C)  $565,000 
D)  $365,000 
A)  $315,000 
B)  $265,000 
C)  $565,000 
D)  $365,000

Question 9

Under variable costing, product costs consist of direct labor, direct materials, and variable overhead.

Accepted Answer

A) True 
 B)False

Question 10

The bottom line of a contribution margin report is net income.

Accepted Answer

A) True 
 B)False

Question 11

A company is currently operating at 65% capacity producing 12,000 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 2,000 units. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

Accepted Answer

12,000/.65 - 12,000 = 6,461 un

Question 12

Absorption costing is required under GAAP.

Accepted Answer

A) True 
 B)False

Question 13

Absorption costing is usually used for internal management purposes, and variable costing is usually used for external reporting purposes.

Accepted Answer

A) True 
 B)False

Question 14

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 variable costing?

Accepted Answer

A)  $187,500 increase. 
B)  $112,500 increase. 
C)  There will be no change in income. 
D)  $112,500 decrease. 
E)  $187,500 decrease. 
A)  $187,500 increase. 
B)  $112,500 increase. 
C)  There will be no change in income. 
D)  $112,500 decrease. 
E)  $187,500 decrease.

Question 15

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best describes costs assigned to the product under the variable costing method? 
Direct labor (DL)
Direct materials (DM)
Variable selling and administrative (VSA)
Variable manufacturing overhead (VOH)
Fixed selling and administrative (FSA)
Fixed manufacturing overhead (FOH)

Accepted Answer

A)  DL, DM, VSA, and VOH. 
B)  DL, DM, and VOH. 
C)  DL, DM, VOH, and FOH. 
D)  DL and DM. 
E)  DL, DM, FSA, and FOH. 
A)  DL, DM, VSA, and VOH. 
B)  DL, DM, and VOH. 
C)  DL, DM, VOH, and FOH. 
D)  DL and DM. 
E)  DL, DM, FSA, and FOH.

Question 17

Which of the following statements is true regarding absorption costing?

Accepted Answer

A)  It is not the traditional costing approach. 
B)  It is not permitted to be used for financial reporting. 
C)  It is not permitted to be used for tax reporting. 
D)  It assigns all manufacturing costs to products. 
E)  It requires only variable costs to be treated as product costs. 
A)  It is not the traditional costing approach. 
B)  It is not permitted to be used for financial reporting. 
C)  It is not permitted to be used for tax reporting. 
D)  It assigns all manufacturing costs to products. 
E)  It requires only variable costs to be treated as product costs.

Question 18

Income ________ when there is zero beginning inventory and all inventory units produced are sold.

Accepted Answer

A)  Will be lower under variable costing than absorption costing 
B)  Will be the same under both variable and absorption costing 
C)  Will be higher under variable costing than absorption costing 
D)  Will be higher than gross margin under variable costing 
A)  Will be lower under variable costing than absorption costing 
B)  Will be the same under both variable and absorption costing 
C)  Will be higher under variable costing than absorption costing 
D)  Will be higher than gross margin under variable costing

Question 19

Contribution margin is the excess of sales over total variable costs.

Accepted Answer

A) True 
 B)False

Question 20

Sales less total variable costs equals manufacturing margin.

Accepted Answer

A) True 
 B)False

Given the following data, total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing.

Income under absorption costing will always be different than income under variable costing.

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Reporting contribution margin by market segment is useful in assessing the profitability of each segment.

Using absorption costing, which of the following manufacturing costs are assigned to products?

What costs are treated as product costs under the variable costing method?

Under variable costing, product costs consist of direct labor, direct materials, and variable overhead.

The bottom line of a contribution margin report is net income.

Absorption costing is required under GAAP.

Absorption costing is usually used for internal management purposes, and variable costing is usually used for external reporting purposes.

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing.

Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative (VSA) Variable manufacturing overhead (VOH) Fixed selling and administrative (FSA) Fixed manufacturing overhead (FOH)

Which of the following statements is true regarding absorption costing?

Income ________ when there is zero beginning inventory and all inventory units produced are sold.

Contribution margin is the excess of sales over total variable costs.

Sales less total variable costs equals manufacturing margin.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

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Exam 6: Variable Costing and Analysis

Given the following data, total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing.

Income under absorption costing will always be different than income under variable costing.

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Reporting contribution margin by market segment is useful in assessing the profitability of each segment.

Using absorption costing, which of the following manufacturing costs are assigned to products?

What costs are treated as product costs under the variable costing method?

Under variable costing, product costs consist of direct labor, direct materials, and variable overhead.

The bottom line of a contribution margin report is net income.

Absorption costing is required under GAAP.

Absorption costing is usually used for internal management purposes, and variable costing is usually used for external reporting purposes.

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing.

Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative (VSA) Variable manufacturing overhead (VOH) Fixed selling and administrative (FSA) Fixed manufacturing overhead (FOH)

Which of the following statements is true regarding absorption costing?

Income ________ when there is zero beginning inventory and all inventory units produced are sold.

Contribution margin is the excess of sales over total variable costs.

Sales less total variable costs equals manufacturing margin.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

Filters