Exam 9: Income Effects of Denominator Level on Inventory Valuation

The downward demand spiral for a company is the continuing reduction in the demand for its products that occurs when prices of competitors' products are not met and higher unit costs result in more reluctance to meet competitors' prices.

A major reason for choosing ________ utilization over ________, is the difficulty in forecasting.

Answer the following question(s)using the information below.Greene Manufacturing incurred the following expenses during the current year: -What will be the break-even point if variable costing is used?

Answer the following question(s)using the information below.A manufacturing firm is able to produce 2,000 pairs of shoes per hour, at maximum efficiency.There are three eight-hour shifts each day.Production is actually 1,600 pairs of shoes per hour due to unavoidable operating interruptions.The plant is expected to run every day but was only able to operate for 27 days in September. -What is the theoretical capacity for the month of September?

The costing method that has been labelled as a "black hole" because fixed costs are inventoried is commonly known as

Answer the following question(s)using the information below.Greene Manufacturing incurred the following expenses during the current year: -What is the break-even point in units using absorption costing if the units produced are actually 2,250?

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 cost of goods sold using variable costing?

Jamie's Hot Dog Stands sells hot dogs at ballparks across Canada for $1.55.Variable costs are $1.15 per unit with fixed production costs of $80,000 per month at a level of 320,000 units.Fixed administrative costs total $25,000.Sales average 320,000 units per month, with planned production of 320,000 hot dogs.Required: a.What are break-even unit sales under variable costing? b.What are break-even unit sales under absorption costing if she sells everything she prepares? c.What are break-even unit sales under absorption costing if average sales are 399,000 and planned production is changed to 400,000?

Variable manufacturing costs are accounted for in the same manner on the income statement regardless of whether absorption or variable costing is used.

The period-to-period change in operating income under variable costing is driven by unit level of sales, if the fixed costs are constant.

Variable costs of value chain areas other than manufacturing are typically written off as period costs regardless of the costing method used.

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. -When the distinction between variable and fixed costs is one of the important elements in the preparation of the income statement, the method used should be the

Fresco Bottling Works manufactures glass bottles.January began with 10,000 units carried at $71,500.An additional 55,000 units were produced that month.February had production of 50,000 units.Fixed manufacturing costs totalled $192,500 in January and $180,000 in February.Sales for both months totalled 45,000 units with variable manufacturing costs of $4 per unit.Selling and administrative costs were $0.35 per unit variable and $70,000 fixed.The selling price was $11 per unit.Inventory moves on a first-in, first-out basis.Required: Compute the operating income for both months using absorption costing.

Use the information below to answer the following question(s).Balloon Arrangements produces balloon bouquets.The following information has been provided by management: -What is the total cost per bouquet if absorption costing is used?

Sutton Hot Dog Stands sells hot dogs at ballparks across Canada for $1.35.Variable costs are $1.05 per unit with fixed production costs of $90,000 per month at a level of 400,000 units.Fixed administrative costs total $30,000.Sales average 400,000 units per month, with planned production of 400,000 hot dogs.Required: a.What are break-even unit sales under variable costing? b.What are break-even unit sales under absorption costing if she sells everything she prepares? c.What are break-even unit sales under absorption costing if average sales are 498,000 and planned production is changed to 500,000?

Full product costs under absorption costing include only inventoriable costs and upstream costs.

Holding fixed cost and unit contribution margin constant, operating income rises as the level of sales rises.

Answer the following question(s)using the information below.Marie's Decorating produces and sells a mantel clock for $100 per unit.In 2012, 100,000 clocks were produced and 80,000 were sold.Other information for the year includes: -What is the inventoriable cost per unit using variable costing?

________ is the level of capacity based on producing at full capacity all the time.

The denominator-level concept based on capacity utilization that satisfies average customer demand that includes seasonal and cyclical factors is called