Exam 9: Income Effects of Denominator Level on Inventory Valuation

Which of the following is TRUE concerning throughput costing?

Answer the following question(s)using the information below.Gabe's Auto produces and sells an auto part for $30.00 per unit.In 2012, 100,000 parts were produced and 75,000 units were sold.Other information for the year includes: -What is the inventoriable cost per unit using variable 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 cost per bouquet if throughput costing is used?

The distinction between variable costs and fixed costs is highlighted in variable costing via the contribution-margin format while the distinction between manufacturing and nonmanufacturing costs is central to absorption and is highlighted by the gross-margin format.

Explain the difference between the gross margin format and the contribution margin format for the income statement.What information is highlighted with each?

The following information pertains to ABC Corporation: What is the difference between absorption costing operating income and variable costing operating income?

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. -From the perspective of long-run product costing it is best to use

Megredy Company prepared the following absorption costing income statement for the year ended May 31, 2019. Additional information follows: Selling and administrative expenses include $1.50 of variable cost per unit sold.There was no beginning inventory, and 17,500 units were produced.Variable manufacturing costs were $11 per unit.Actual fixed costs were equal to budgeted fixed costs.Required: Prepare a variable-costing income statement for the same period.

Use the information below to answer the following question(s).Western Technologies Inc.produces dashboard displays.Actual fixed manufacturing overhead is the same as the budgeted amount, $687,500.Production in September increased by 10% over the previous month's production.August production was 25,000 displays.The production level is the same as the budgeted denominator level.At the end of September, 2,000 displays remained in stock.In August, all of the displays were sold by the end of the month and there was no remaining work in process inventory. -When large differences exist between practical capacity and master-budget capacity utilization, companies can classify part of the large difference as

Energy 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

The distinction between absorption costing and variable costing is most important for which type of industry?

SamTech Company has two identical divisions, East and West.Their sales, production volume, and fixed manufacturing costs have been the same for the last five years.The amounts for each division were as follows: East Division uses absorption costing and West Division uses variable costing.Both use FIFO inventory methods.Variable manufacturing costs are $5 per unit.Selling and administrative expenses were identical for each division.There were no inventories at the beginning of Year 1.Required: Which division reports the highest income each year? Explain.

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

The break-even points are the same under both variable costing and absorption costing.

The master-budget capacity utilization, rather than normal capacity utilization or practical capacity, is what should be used for evaluating a marketing manager's performance in the current year.

Use the information below to answer the following question(s).Honda Heaven produces and sells an auto part for $20.00 per unit.Direct materials are $8 per unit, while direct manufacturing labour averages $1.50 per unit.Variable manufacturing overhead is $0.50 per unit and fixed manufacturing overhead is $250,000 per year.Administrative expenses, all fixed, run $90,000 per year, with sales commissions of $2 per part.Production is 100,000 parts per year.And this year, 75,000 boxes were sold. -Under variable costing, which of the following expenses is inventoriable?

Finch-Hutton Machine Works Ltd.uses standard costing based on a practical capacity of 1,050 tractor bearings per month.The actual production for the month of January was 980.The standard variable cost per unit is $11 and budgeted monthly fixed manufacturing overhead is $78,750.Actual costs for January were $11,760 and $78,400 for variable and fixed respectively.There was no work-in-process inventory at the beginning or end of January.The finished goods inventory had no balance at the beginning of January; January sales were 900 units at $135 per unit.Non-manufacturing costs totalled $38,000.Variances are pro-rated to inventory and cost of goods sold based on the balances in the accounts before proration.Required: 1.Prepare an income statement in gross margin format using absorption costing.2.Determine the balance of the January ending finished goods inventory.3.Determine the variances in as much detail as possible then prepare the journal entries to clear the variance accounts.

Throughput costing treats all costs as period costs.