Exam 9: Income Effects of Denominator Level on Inventory Valuation

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

The following information pertains to Brian Stone Corporation: What is the difference between operating incomes under absorption costing and variable costing?

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 practical capacity for the month of September?

The difference between variable costing and absorption costing centres on accounting for variable costs.

One of the biggest reasons variable costing is controversial involves

a.List the four different measures of capacity. b.Which measure of capacity is best for setting prices? Why? c.Which measure of capacity is best for evaluating the performance of the marketing manager for the current year? Why?

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?

Normandeau Corporation manufactures and sells laptop computers and uses standard costing.For the month of September there was no beginning inventory,there were 1,500 units produced and 1,250 units sold.The manufacturing variable cost per unit is $770 and the operating cost per unit was $625.The fixed manufacturing cost is $450,000 and the fixed operating cost is $75,000.The selling price per unit is $1,850. Required: Prepare the income statement for Normandeau Corporation for September under variable costing.

How does the capacity level chosen to compute the budgeted fixed overhead cost rate affect the production-volume variance?

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

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

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.

Unused capacity is considered wasted resources and the result of poor planning.

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. -What is Honda Heaven's inventoriable cost per box using absorption costing?

Under variable costing,which of the following expenses is inventoriable?

For Consumer Lumber what would be the total difference between operating incomes under absorption costing and variable costing?

In absorption costing,all nonmanufacturing costs are subtracted from gross margin.

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 budgeted denominator level is 1,000 units. Units produced total 750 units. Units sold total 600 units. Beginning inventory was zero. 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

Bruster Company sells its products for $66 each.The current production level is 25,000 units,although only 20,000 units are anticipated to be sold. Required: a.Prepare an income statement using absorption costing in the gross margin format. b.Prepare an income statement using variable costing in the contribution margin format.

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?