Question 1

Throughput costing is also referred to as super-variable costing.

Accepted Answer

A) True 
 B)False

Question 2

Both theoretical and practical capacity measure capacity in terms of demand for the output.

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

a.
 @#IMG-DLM& Unit costs:
 @#IMG-DLM& E

Question 4

Which of the following is true concerning throughput costing?

Accepted Answer

A)  It is also called super-absorption costing. 
B)  It treats all costs except those related to direct labour as period costs. 
C)  It provides more incentive to build-up inventories than does absorption costing. 
D)  It provides more incentive to build-up inventories than does variable costing. 
E)  Other things being equal, is more conservative than absorption costing. 
A)  It is also called super-absorption costing. 
B)  It treats all costs except those related to direct labour as period costs. 
C)  It provides more incentive to build-up inventories than does absorption costing. 
D)  It provides more incentive to build-up inventories than does variable costing. 
E)  Other things being equal, is more conservative than absorption costing.

Question 5

Throughput costing considers only direct materials and direct manufacturing labour to be truly variable costs.

Accepted Answer

A) True 
 B)False

Question 6

When comparing the operating incomes between absorption costing and variable costing, and beginning finished inventory exceeds ending finished inventory, it may be assumed that

Accepted Answer

A)  sales increased during the period. 
B)  variable cost per unit is less than fixed cost per unit. 
C)  absorption costing income exceeds variable costing income. 
D)  variable costing income exceeds absorption costing income. 
E)  variable costing income equals absorption costing income. 
A)  sales increased during the period. 
B)  variable cost per unit is less than fixed cost per unit. 
C)  absorption costing income exceeds variable costing income. 
D)  variable costing income exceeds absorption costing income. 
E)  variable costing income equals absorption costing income.

Question 7

Plate Company just hired its fourth production manager in three years. All three previous managers had quit because they could not get the company above the break-even point, even though sales had increased somewhat each year. The company was operating at about 60 percent of plant capacity. The flatware industry was growing, so increased sales were not out of the question.
I. R. Dumm took the job as manager of the production division with a very attractive salary package. After interviewing for the position, he proposed a salary and bonus package that would give him a very small salary but a large bonus if he took the operating income (using absorption costing) above the break-even point during his very first year.
Required:
What do you think Mr. Dumm had in mind for increasing the company's operating income?

Accepted Answer

Mr. Dumm realized that he could probably

Question 8

The method of costing that excludes fixed manufacturing costs from inventorial costs is known as

Accepted Answer

A)  absorption costing. 
B)  fixed overhead costing. 
C)  manufacturing overhead costing. 
D)  variable costing. 
E)  full manufacturing costing. 
A)  absorption costing. 
B)  fixed overhead costing. 
C)  manufacturing overhead costing. 
D)  variable costing. 
E)  full manufacturing costing.

Question 9

Answer the following question(s) using the information below.
Reusser Company produces wood statues. Management has provided the following information:
  
-If 400 units are produced and 600 units are sold, ________ results in the greatest amount of operating income.

Accepted Answer

A)  throughput costing 
B)  variable costing 
C)  absorption costing 
D)  period costing 
E)  direct costing 
A)  throughput costing 
B)  variable costing 
C)  absorption costing 
D)  period costing 
E)  direct costing

Question 10

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

Accepted Answer

The gross margin format divides costs in

Question 11

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

Accepted Answer

A)  Practical capacity 
B)  Theoretical capacity 
C)  Normal capacity 
D)  Demand capacity 
E)  Master-budget capacity 
A)  Practical capacity 
B)  Theoretical capacity 
C)  Normal capacity 
D)  Demand capacity 
E)  Master-budget capacity

Question 12

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?

Accepted Answer

A)  $5.50 
B)  $4.75 
C)  $3.75 
D)  $2.50 
E)  $1.98 
A)  $5.50 
B)  $4.75 
C)  $3.75 
D)  $2.50 
E)  $1.98

Question 13

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

Accepted Answer

A)  absorption costing. 
B)  direct costing. 
C)  break-even point costing. 
D)  variable costing. 
E)  standard costing. 
A)  absorption costing. 
B)  direct costing. 
C)  break-even point costing. 
D)  variable costing. 
E)  standard costing.

Question 14

Answer the following question(s) using the information below.
Heinrich Corporation budgeted fixed manufacturing costs of $6,000 during 2012. Other information for 2012 includes:
   The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
-Fixed manufacturing costs expensed on the income statement (excluding adjustments for variances) total

Accepted Answer

A)  $3,600. 
B)  $4,800. 
C)  $6,000. 
D)  $0. 
E)  $7,200. 
A)  $3,600. 
B)  $4,800. 
C)  $6,000. 
D)  $0. 
E)  $7,200.

Question 15

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

Accepted Answer

A)  variable; asset 
B)  absorption; period cost 
C)  absorption; asset 
D)  variable; liability 
E)  absorption; variable cost in the long run 
A)  variable; asset 
B)  absorption; period cost 
C)  absorption; asset 
D)  variable; liability 
E)  absorption; variable cost in the long run

Question 16

Calvin Enterprises produces a specialty statue item. The following information has been provided by
management:
     Required:
a. What is the cost per statue if absorption costing is used?
b. What is the cost per statue if throughput costing is used?
c. What is the total throughput contribution?

Accepted Answer

a. $9 + $5 + $4 = $1

Question 17

What is the theoretical capacity for the month of April?

Accepted Answer

A)  600,000 units 
B)  720,000 units 
C)  744,400 units 
D)  576,000 units 
E)  480,000 units 
A)  600,000 units 
B)  720,000 units 
C)  744,400 units 
D)  576,000 units 
E)  480,000 units

Question 18

Use the information below to answer the following question(s).
Balloon Arrangements produces balloon bouquets. The following information has been provided by management:
  
-Which of the following criteria should be used to evaluate management according to critics of absorption costing?

Accepted Answer

A)  the extent to which inventory production matches demand 
B)  the extent to which financial performance measures are used 
C)  the extent to which operating income is increased in the short run 
D)  the extent to which production quotas are exceeded 
E)  We should rely only on financial criteria to measure performance. 
A)  the extent to which inventory production matches demand 
B)  the extent to which financial performance measures are used 
C)  the extent to which operating income is increased in the short run 
D)  the extent to which production quotas are exceeded 
E)  We should rely only on financial criteria to measure performance.

Question 19

The new plant manager has lots of ideas for change. His bonus is tied directly to plant profit, and last month he had the accounting department change from absorption costing to variable costing, as he heard at a meeting that contribution margin was usually higher than gross margin. This month, he wants to change to throughput costing, in hopes that throughput contribution will be greater than contribution margin. The relevant data are: Sales $150,000; opening inventory $2,500; variable cost of goods manufactured $24,000; ending inventory using variable costing $8,000; variable marketing cost $15,200; and, there are no variable cost variances. The above numbers are the same for throughput costing except as follows: direct materials in goods manufactured $13,200; and, ending inventory $4,400.
Required:
a. Calculate the contribution margin and throughput margin.
b. Does this appear to be a sensible strategy by the plant manager?

Accepted Answer

@#IMG-DLM& b. This is probably not a wise strategy

Question 20

Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?

Accepted Answer

No, companies in this situation might ex

Throughput costing is also referred to as super-variable costing.

Both theoretical and practical capacity measure capacity in terms of demand for the output.

Which of the following is true concerning throughput costing?

Throughput costing considers only direct materials and direct manufacturing labour to be truly variable costs.

When comparing the operating incomes between absorption costing and variable costing, and beginning finished inventory exceeds ending finished inventory, it may be assumed that

The method of costing that excludes fixed manufacturing costs from inventorial costs is known as

Answer the following question(s) using the information below. Reusser Company produces wood statues. Management has provided the following information: -If 400 units are produced and 600 units are sold, ________ results in the greatest amount of operating income.

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

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

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?

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

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

Calvin Enterprises produces a specialty statue item. The following information has been provided by management: Required: a. What is the cost per statue if absorption costing is used? b. What is the cost per statue if throughput costing is used? c. What is the total throughput contribution?

What is the theoretical capacity for the month of April?

Use the information below to answer the following question(s). Balloon Arrangements produces balloon bouquets. The following information has been provided by management: -Which of the following criteria should be used to evaluate management according to critics of absorption costing?

Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 9: Income Effects of Denominator Level on Inventory Valuation

Throughput costing is also referred to as super-variable costing.

Both theoretical and practical capacity measure capacity in terms of demand for the output.

Which of the following is true concerning throughput costing?

Throughput costing considers only direct materials and direct manufacturing labour to be truly variable costs.

When comparing the operating incomes between absorption costing and variable costing, and beginning finished inventory exceeds ending finished inventory, it may be assumed that

The method of costing that excludes fixed manufacturing costs from inventorial costs is known as

Answer the following question(s) using the information below. Reusser Company produces wood statues. Management has provided the following information: -If 400 units are produced and 600 units are sold, ________ results in the greatest amount of operating income.

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

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

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?

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

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

Calvin Enterprises produces a specialty statue item. The following information has been provided by management: Required: a. What is the cost per statue if absorption costing is used? b. What is the cost per statue if throughput costing is used? c. What is the total throughput contribution?

What is the theoretical capacity for the month of April?

Use the information below to answer the following question(s). Balloon Arrangements produces balloon bouquets. The following information has been provided by management: -Which of the following criteria should be used to evaluate management according to critics of absorption costing?

Should a company with high fixed costs and unused capacity raise selling prices to try to fully recoup its costs?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Management

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

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