Question 1

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

Accepted Answer

A) practical 
B) theoretical 
C) supply 
D) demand 
E) master-budget 
A) practical 
B) theoretical 
C) supply 
D) demand 
E) master-budget

Question 2

Which of the following inventory costing methods results in the LEAST amount of costs being inventoried?

Accepted Answer

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

Question 3

External reporting requires the use of ________ capacity in the denominator,taking into account off-limits idle capacity.

Accepted Answer

A) theoretical 
B) practical 
C) budget 
D) normal 
E) practical or normal 
A) theoretical 
B) practical 
C) budget 
D) normal 
E) practical or normal

Question 4

Answer the following question(s)using the information below.
Stober Company produces a specialty item.Management has provided the following information:
  
-What is the total throughput contribution?

Accepted Answer

A) $1,080,000 
B) $1,260,000 
C) $1,500,000 
D) $1,620,000 
E) $1,800,000 
A) $1,080,000 
B) $1,260,000 
C) $1,500,000 
D) $1,620,000 
E) $1,800,000

Question 5

________ is the level of capacity based on producing at full capacity 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 6

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.

Accepted Answer

A) True 
 B)False

Question 7

Throughput costing results in a higher amount of manufacturing costs being placed in inventory than either variable or absorption costing.

Accepted Answer

A) True 
 B)False

Question 8

Practical capacity is based on which of the following assumptions?

Accepted Answer

A) that absorption costing is used 
B) that variable costing is used 
C) Production will occur at peak efficiency all the time. 
D) Production will occur at peak capacity where feasible (e.g. ,except for maintenance downtime,repairs,holidays,etc. ). 
E) Production can never occur at peak capacity. 
A) that absorption costing is used 
B) that variable costing is used 
C) Production will occur at peak efficiency all the time. 
D) Production will occur at peak capacity where feasible (e.g. ,except for maintenance downtime,repairs,holidays,etc. ). 
E) Production can never occur at peak capacity.

Question 9

Variable costing includes all direct manufacturing costs and all manufacturing overhead costs.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is correct concerning variable vs absorption costing?

Accepted Answer

A) Absorption costing income statement classifies fixed costs as period costs. 
B) The absorption costing income statement combines costs by cost behaviour. 
C) Absorption costing income statements need to differentiate between variable and fixed costs. 
D) The difference in operating income between the two approaches is captured by the difference between fixed manufacturing costs in ending inventory minus fixed manufacturing costs in opening inventory. 
E) The difference in operating income between the two approaches is captured by the difference between fixed manufacturing costs in ending inventory minus variable manufacturing costs in ending inventory. 
A) Absorption costing income statement classifies fixed costs as period costs. 
B) The absorption costing income statement combines costs by cost behaviour. 
C) Absorption costing income statements need to differentiate between variable and fixed costs. 
D) The difference in operating income between the two approaches is captured by the difference between fixed manufacturing costs in ending inventory minus fixed manufacturing costs in opening inventory. 
E) The difference in operating income between the two approaches is captured by the difference between fixed manufacturing costs in ending inventory minus variable manufacturing costs in ending inventory.

Question 11

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 inventory cost per box using variable costing?

Accepted Answer

A) $9.50 
B) $10.00 
C) $12.50 
D) $13.40 
E) $15.40 
A) $9.50 
B) $10.00 
C) $12.50 
D) $13.40 
E) $15.40

Question 12

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

Accepted Answer

A) master-budget capacity utilization to highlight unused capacity. 
B) normal capacity utilization for benchmarking purposes. 
C) practical capacity for pricing decisions. 
D) theoretical capacity for performance evaluation. 
E) supply capacity to satisfy customer demand. 
A) master-budget capacity utilization to highlight unused capacity. 
B) normal capacity utilization for benchmarking purposes. 
C) practical capacity for pricing decisions. 
D) theoretical capacity for performance evaluation. 
E) supply capacity to satisfy customer demand.

Question 13

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

Accepted Answer

A) $11,500 
B) $5,000 
C) $10,000 
D) $10,500 
E) $21,500 
A) $11,500 
B) $5,000 
C) $10,000 
D) $10,500 
E) $21,500

Question 14

The budgeted fixed manufacturing cost rate is the lowest for

Accepted Answer

A) practical capacity. 
B) supply capacity. 
C) master-budget capacity utilization. 
D) normal capacity utilization. 
E) theoretical capacity. 
A) practical capacity. 
B) supply capacity. 
C) master-budget capacity utilization. 
D) normal capacity utilization. 
E) theoretical capacity.

Question 15

a.Explain the difference between the variable and absorption costing methods.
b.Which method(s)are required for external reporting? For internal reporting?

Accepted Answer

a.Absorption costing includes both fixed

Question 16

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

Accepted Answer

A) theoretical capacity;master-budget 
B) practical capacity;master-budget 
C) normal capacity utilization;master-budget 
D) master-budget;theoretical capacity 
E) master-budget;normal capacity utilization 
A) theoretical capacity;master-budget 
B) practical capacity;master-budget 
C) normal capacity utilization;master-budget 
D) master-budget;theoretical capacity 
E) master-budget;normal capacity utilization

Question 17

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 absorption costing?

Accepted Answer

A) $14.25 
B) $15.00 
C) $18.75 
D) $20.10 
E) $20.00 
A) $14.25 
B) $15.00 
C) $18.75 
D) $20.10 
E) $20.00

Question 18

Which of the following is TRUE concerning throughput costing?

Accepted Answer

A) Throughput contribution is the sum of revenues and direct costs. 
B) Throughput contribution is the difference between revenues and direct costs. 
C) Throughput contribution is the difference between revenues and variable direct labour. 
D) Throughput contribution is the difference between revenues and (variable direct labour + variable direct materials). 
E) Throughput contribution is the difference between revenues and variable direct materials costs. 
A) Throughput contribution is the sum of revenues and direct costs. 
B) Throughput contribution is the difference between revenues and direct costs. 
C) Throughput contribution is the difference between revenues and variable direct labour. 
D) Throughput contribution is the difference between revenues and (variable direct labour + variable direct materials). 
E) Throughput contribution is the difference between revenues and variable direct materials costs.

Question 19

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 included in ending inventory total

Accepted Answer

A) $1,200. 
B) $1,500. 
C) $0. 
D) $900. 
E) $2,400. 
A) $1,200. 
B) $1,500. 
C) $0. 
D) $900. 
E) $2,400.

Question 20

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.

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

Which of the following inventory costing methods results in the LEAST amount of costs being inventoried?

External reporting requires the use of ________ capacity in the denominator,taking into account off-limits idle capacity.

Answer the following question(s)using the information below. Stober Company produces a specialty item.Management has provided the following information: -What is the total throughput contribution?

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

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.

Throughput costing results in a higher amount of manufacturing costs being placed in inventory than either variable or absorption costing.

Practical capacity is based on which of the following assumptions?

Variable costing includes all direct manufacturing costs and all manufacturing overhead costs.

Which of the following is correct concerning variable vs absorption costing?

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

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

The budgeted fixed manufacturing cost rate is the lowest for

a.Explain the difference between the variable and absorption costing methods. b.Which method(s)are required for external reporting? For internal reporting?

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

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 absorption costing?

Which of the following is TRUE concerning throughput costing?

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

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

Analysis of Cost Behaviour

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

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 9: Income Effects of Denominator Level on Inventory Valuation

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

Which of the following inventory costing methods results in the LEAST amount of costs being inventoried?

External reporting requires the use of ________ capacity in the denominator,taking into account off-limits idle capacity.

Answer the following question(s)using the information below. Stober Company produces a specialty item.Management has provided the following information: -What is the total throughput contribution?

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

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.

Throughput costing results in a higher amount of manufacturing costs being placed in inventory than either variable or absorption costing.

Practical capacity is based on which of the following assumptions?

Variable costing includes all direct manufacturing costs and all manufacturing overhead costs.

Which of the following is correct concerning variable vs absorption costing?

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

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

The budgeted fixed manufacturing cost rate is the lowest for

a.Explain the difference between the variable and absorption costing methods. b.Which method(s)are required for external reporting? For internal reporting?

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

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 absorption costing?

Which of the following is TRUE concerning throughput costing?

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

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

Analysis of Cost Behaviour

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

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

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