Exam 6: Variable Costing and Analysis

Under absorption costing, a company had the following unit costs when 10,000 units were produced: The total product cost per unit under absorption costing if 25,000 units had been produced would be $11.

________ costing is the only acceptable basis for both external reporting and tax reporting.

When units produced equal units sold, reported income is identical under absorption costing and variable costing.

Heather, Incorporated reports the following annual cost data for its single product: This product is normally sold for $56 per unit. If Heather increases its production to 80,000 units while sales remain at the current 60,000 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.

Stonehenge Inc., a manufacturer of landscaping blocks, began operations on April 1 of the current year. During this time, the company produced 750,000 units and sold 720,000 units at a sales price of $9 per unit. Cost information for this period is shown in the following table: a. Prepare Stonehenge's December 31^st income statement for the current year under absorption costing. b. Prepare Stonehenge's December 31^st income statement for the current year under variable costing.

Front Company had net income of $72,500 based on variable costing. Beginning and ending inventories were 800 units and 1,200 units, respectively. Assume the fixed overhead per unit was $7.90 for both the beginning and ending inventory. What is net income under absorption costing?

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

Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end, the company reported the following income statement using absorption costing: Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced). Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

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

Alexis Co. reported the following information for May: What is the manufacturing margin for Part A?

Managers should accept special orders provided the special order price exceeds the product cost per unit under absorption costing.

Toth, Inc. had net income of $950,000 based on variable costing. Beginning and ending inventories were 60,000 units and 56,000 units, respectively. Assume the fixed overhead cost per unit was $.85 for both the beginning and ending inventory. What is net income under absorption costing?

Under absorption costing, the product unit cost consists of direct labor, direct materials, variable overhead, and ________.

Wrap-It Company, a manufacturer of wrapping paper, began operations on June 1 of the current year. During this time, the company produced 370,000 units and sold 310,000 units at a sales price of $50 per unit. Cost information for this period is shown in the following table: Variable selling and administrative $78,000 in total Fixed selling and administrative $210,000 in total a. Prepare Wrap-It's December 31^st income statement for the current year under absorption costing. b. Prepare Wrap-It's December 31^st income statement for the current year under variable costing.

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

Tim's Tools, a manufacturer of cordless drills, began operations this year. During this year, the company produced 20,000 units and sold 18,000 units. At year-end, the company reported the following income statement using absorption costing: Production costs per unit total $14, which consists of $12.90 in variable production costs and $1.10 in fixed production costs (based on the 20,000 units produced). 60% of total selling and administrative expenses are variable. Compute net income under variable costing.

Absorption costing is also called ________ costing.

When the number of units produced is equal to the number of units sold, net income reported under variable costing is identical to net income reported under absorption costing.

Given Advanced Company's data, compute cost per unit of finished goods under absorption costing.

Under absorption costing, fixed manufacturing overhead is expensed at the time the units are produced. Under variable costing, fixed manufacturing overhead is expensed at the time the units are sold.