Exam 9: Income Effects of Denominator Level on Inventory Valuation

Answer the following question(s)using the information below.Stober Company produces a specialty item.Management has provided the following information: -What is the cost per statue if throughput costing is used?

Answer the following question(s)using the information below.Reusser Company produces wood statues.Management has provided the following information: -What is the total throughput contribution?

A possible criticism of ________ costing is that fixed manufacturing overhead is treated as a/an ________.

Answer the following question(s)using the information below.Ms.Andrea Chadwick, the company president, has heard that there are multiple break-even points for every product.She does not believe this and has asked you to provide the evidence of such a possibility.Some information about the company for current year is as follows: -What are break-even sales in units using variable costing?

Variable costing does not include variable indirect manufacturing costs as inventoriable costs.

Absorption costing defers the fixed manufacturing costs in ending inventory to a future period, but variable costing expenses these costs in the current period.

Answer the following question(s)using the information below.The following information pertains to the Bean Company: -What is the absorption costing break-even point in units if production is increased to 12,000 units?

Absorption costing can be criticized as a method that encourages managers to make decisions that may be contrary to the long-term interest of the company.

Answer the following question(s)using the information below.Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation, 2,000 units were produced and 1,750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes: -What is contribution margin using variable costing?

Using ________ capacity fixes the cost of capacity at the cost of supplying the capacity regardless of the demand for capacity.

Answer the following question(s)using the information below.A manufacturing firm is able to produce 1,000 pairs of shoes per hour, at maximum efficiency.There are three eight-hour shifts each day.Due to unavoidable operating interruptions, production averages 800 units per hour.In the month of June the plant actually operated only 25 days due to avoidable shut downs. -What is the theoretical capacity for the month of April?

Johnson and Sons Company was concerned that increased sales did not result in increased profits for 2019.Both variable unit and total fixed manufacturing costs for 2018 and 2019 remained constant at $20 and $2,000,000, respectively.In 2018 the company produced 100,000 units and sold 80,000 units at a price of $50 per unit.There was no beginning inventory in 2011.In 2019 the company made 70,000 units and sold 90,000 units at a price of $50.Selling and administrative expenses were all fixed at $100,000 each year.Required: a.Prepare income statements for each year using absorption costing in the gross margin format. b.Prepare income statements for each year using variable costing in the contribution margin format. c.Explain why the income was different each year using the two methods.Show computations.

Which of the following is TRUE concerning throughput costing?

Master-budget capacity utilization

Amalgamated Glass and Mirror Inc.had sales of 37,500 units and production of 50,000 units.Other information for the year included: There was no beginning inventory.Required: a.Compute the ending finished goods inventory under both absorption and variable costing. b.Compute the cost of goods sold under both absorption and variable costing.

Use the information below to answer the following question(s).Urban Body Products Ltd.manufactures body wash liquid soap.The controller has provided the following information and stated that standard costing is used for manufacturing, marketing, and administrative costs. There were no beginning or ending inventories of materials or work-in-process. -What is the per unit variable cost at Urban Body Products Ltd.?

Answer the following question(s)using the information below.The following information pertains to the Bean Company: -What is the absorption costing break-even point in units?

The manager of the manufacturing division of Winnipeg Windows does not understand why gross margin went down in February when sales went up.Some of the information she has selected for evaluation include: The division operated at normal capacity during January.Variable manufacturing cost per unit was $5, and the fixed manufacturing costs were $400,000.Selling and administrative expenses were all fixed.Required: Explain why the gross margin in February was lower than January even though February sales were higher.How would variable costing income statements help the manager understand the division's operating income?

Power Foods produces food products for people active in sports.The following budgeted volume and costs has been provided for one of their post-workout beverages: Required: Calculate the following amounts: a.gross margin per unit under absorption costing b.contribution margin per unit under variable costing c.contribution margin per unit under throughput costing

Throughput costing provides more incentive to produce inventory than does absorption costing.