Question 1

Which of the following statements is true?

Accepted Answer

A)  Variable costing treats fixed overhead as a period cost. 
B)  Absorption costing treats fixed overhead as a period cost. 
C)  Absorption costing treats fixed overhead as an expense in the period it is incurred. 
D)  Variable costing excludes all overhead from product costs. 
E)  Managers can manipulate earnings more easily under variable costing by varying the production level. 
A)  Variable costing treats fixed overhead as a period cost. 
B)  Absorption costing treats fixed overhead as a period cost. 
C)  Absorption costing treats fixed overhead as an expense in the period it is incurred. 
D)  Variable costing excludes all overhead from product costs. 
E)  Managers can manipulate earnings more easily under variable costing by varying the production level.

Question 2

When excess capacity exists, what is the minimum special order price a manager should accept to increase net income?

Accepted Answer

With excess capacity, increases in produ

Question 3

A company reports the following information for its first year of operations:   If the company's cost per unit of finished goods using variable costing is $2.02, what is the amount of total fixed overhead?

Accepted Answer

A)  $26,660 
B)  $35,690 
C)  $24,510 
D)  $60,200 
E)  Cannot be determined from the given data. 
A)  $26,660 
B)  $35,690 
C)  $24,510 
D)  $60,200 
E)  Cannot be determined from the given data.

Question 4

For short-term pricing decisions, absorption costing is an appropriate costing method to use.

Accepted Answer

A) True 
 B)False

Question 5

Materials Corporation sold 12,000 units of its product at a price of $67 per unit. Total variable cost per unit is $54.94, consisting of $45.05 in variable production cost and $9.89 in variable selling and administrative cost. Compute the contribution margin for the company.

Accepted Answer

$67.00 - $54.94 = $1

Question 6

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.

Accepted Answer

A) True 
 B)False

Question 7

When evaluating a special order, management should:

Accepted Answer

A)  Only accept the order if the incremental revenue exceeds all product costs. 
B)  Only accept the order if the incremental revenue exceeds fixed product costs. 
C)  Only accept the order if the incremental revenue exceeds total variable product costs. 
D)  Only accept the order if the incremental revenue exceeds full absorption product costs. 
E)  Only accept the order if the incremental revenue exceeds regular sales revenue. 
A)  Only accept the order if the incremental revenue exceeds all product costs. 
B)  Only accept the order if the incremental revenue exceeds fixed product costs. 
C)  Only accept the order if the incremental revenue exceeds total variable product costs. 
D)  Only accept the order if the incremental revenue exceeds full absorption product costs. 
E)  Only accept the order if the incremental revenue exceeds regular sales revenue.

Question 8

Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under absorption costing.

Accepted Answer

A)  $55,000 
B)  $67,500 
C)  $80,500 
D)  $122,500 
E)  $205,000 
A)  $55,000 
B)  $67,500 
C)  $80,500 
D)  $122,500 
E)  $205,000

Question 9

A company is currently operating at 80% capacity producing 5,000 units. Current cost information relating to this production is shown in the table below:   The company has been approached by a customer with a request for a 100-unit special order. 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

A)  Any amount over $34 per unit. 
B)  Any amount over $20 per unit. 
C)  Any amount over $14 per unit. 
D)  Any amount over $9 per unit. 
E)  Any amount over $5 per unit. 
A)  Any amount over $34 per unit. 
B)  Any amount over $20 per unit. 
C)  Any amount over $14 per unit. 
D)  Any amount over $9 per unit. 
E)  Any amount over $5 per unit.

Question 10

Castaway Company reports the following first year production cost information:
   a. Compute production cost per unit under variable costing.
b. Compute production cost per unit under absorption costing.
c. Determine the cost of ending inventory using variable costing.
d. Determine the cost of ending inventory using absorption costing.

Accepted Answer

a. $8 DL + $4 DM + ($2,173,000/53,000) V

Question 11

Blatt Company, a manufacturer of slippers, began operations on June 1 of the current year. During this time, the company produced 210,000 units and sold 185,000 units at a sales price of $40 per unit. Cost information for this period is shown in the following table:
   a. Prepare Blatt's December 31st income statement for the current year under absorption costing.
b. Prepare Blatt's December 31st income statement for the current year under variable costing.

Accepted Answer

Question 12

Cost information from both absorption costing and variable costing can aid managers in pricing.

Accepted Answer

A) True 
 B)False

Question 13

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

Accepted Answer

A) True 
 B)False

Question 14

What is Red and White's contribution margin for this month if 980 units were sold?

Accepted Answer

A)  $38,000 
B)  $18,620 
C)  $24,500 
D)  $50,000 
E)  $21,560 
A)  $38,000 
B)  $18,620 
C)  $24,500 
D)  $50,000 
E)  $21,560

Question 15

Under an income statement prepared using absorption costing, expenses are grouped according to cost behavior.

Accepted Answer

A) True 
 B)False

Question 16

A company reports the following information for its first year of operations:   If the company's cost per unit of finished goods using absorption costing is $27, how many units were produced?

Accepted Answer

A)  4,000 units. 
B)  3,600 units. 
C)  1,846 units. 
D)  2,667 units. 
E)  2,000 units. 
A)  4,000 units. 
B)  3,600 units. 
C)  1,846 units. 
D)  2,667 units. 
E)  2,000 units.

Question 17

When setting long-term sales prices for products, the sales price must cover all costs, including fixed costs.

Accepted Answer

A) True 
 B)False

Question 18

________ is a costing method that includes all manufacturing costs in unit product costs.

Accepted Answer

The answer of ________ is a costing method that includes...

Question 19

What is the general procedure for converting variable costing net income to absorption costing net income?

Accepted Answer

The general formula is variabl

Question 20

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

Accepted Answer

A)  $(1,380) 
B)  $(2,000) 
C)  $2,700 
D)  $6,620 
E)  $10,620 
A)  $(1,380) 
B)  $(2,000) 
C)  $2,700 
D)  $6,620 
E)  $10,620

Which of the following statements is true?

When excess capacity exists, what is the minimum special order price a manager should accept to increase net income?

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using variable costing is $2.02, what is the amount of total fixed overhead?

For short-term pricing decisions, absorption costing is an appropriate costing method to use.

Materials Corporation sold 12,000 units of its product at a price of $67 per unit. Total variable cost per unit is $54.94, consisting of $45.05 in variable production cost and $9.89 in variable selling and administrative cost. Compute the contribution margin for the company.

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.

When evaluating a special order, management should:

Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under absorption costing.

Cost information from both absorption costing and variable costing can aid managers in pricing.

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

What is Red and White's contribution margin for this month if 980 units were sold?

Under an income statement prepared using absorption costing, expenses are grouped according to cost behavior.

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using absorption costing is $27, how many units were produced?

When setting long-term sales prices for products, the sales price must cover all costs, including fixed costs.

________ is a costing method that includes all manufacturing costs in unit product costs.

What is the general procedure for converting variable costing net income to absorption costing net income?

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

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

Exam 6: Variable Costing and Analysis

Which of the following statements is true?

When excess capacity exists, what is the minimum special order price a manager should accept to increase net income?

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using variable costing is $2.02, what is the amount of total fixed overhead?

For short-term pricing decisions, absorption costing is an appropriate costing method to use.

Materials Corporation sold 12,000 units of its product at a price of $67 per unit. Total variable cost per unit is $54.94, consisting of $45.05 in variable production cost and $9.89 in variable selling and administrative cost. Compute the contribution margin for the company.

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.

When evaluating a special order, management should:

Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under absorption costing.

Cost information from both absorption costing and variable costing can aid managers in pricing.

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

What is Red and White's contribution margin for this month if 980 units were sold?

Under an income statement prepared using absorption costing, expenses are grouped according to cost behavior.

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using absorption costing is $27, how many units were produced?

When setting long-term sales prices for products, the sales price must cover all costs, including fixed costs.

________ is a costing method that includes all manufacturing costs in unit product costs.

What is the general procedure for converting variable costing net income to absorption costing net income?

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

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