Question 1

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 exp

Question 2

Briefly discuss two methods of reducing the undesirable incentives associated with the use of absorption
costing to evaluate the performance of a plant manager.

Accepted Answer

There are several ways to reduce the und

Question 3

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 4

Use the information below to answer the following question(s).
Beauty Supply Company manufactures shampoo.The supervisor 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.
-What would Beauty Supply Company's operating income (loss)be for January and February,respectively,using the variable costing approach?

Accepted Answer

A) $18,000 and $24,200 
B) $(45,000)and $(35,500) 
C) $(44,000)and $(33,809) 
D) $(42,000)and $(35,800) 
E) $(22,000)and $(15,800) 
A) $18,000 and $24,200 
B) $(45,000)and $(35,500) 
C) $(44,000)and $(33,809) 
D) $(42,000)and $(35,800) 
E) $(22,000)and $(15,800)

Question 5

The marketing manager's performance evaluation is most fair when based on a denominator level using

Accepted Answer

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

Question 6

Ewing Company planned to be in operation for three years.During the first year,it had no sales but incurred $120,000 in variable manufacturing expenses and $40,000 in fixed manufacturing expenses.In the next year,it sold half of the finished goods inventory from the previous year for $100,000 but it had no manufacturing costs.In the third year,it sold the remainder of the inventory for $120,000,had no manufacturing expenses and went out of business.Marketing and administrative expenses were fixed and totalled $20,000 each year.
Required:
a.Prepare an income statement for each year using absorption costing in the gross margin format.
b.Prepare an income statement for each year using variable costing contribution margin format.

Accepted Answer

The answer of Ewing Company planned to be in operation...

Question 7

Normal capacity utilization is not the same as master-budget capacity utilization.

Accepted Answer

A) True 
 B)False

Question 8

Master-budget capacity utilization

Accepted Answer

A) hides the amount of unused capacity. 
B) represents the maximum units of production for current capacity. 
C) provides the best cost estimate for benchmarking purposes. 
D) when used for product costing results in the lowest cost estimate of the four capacity options. 
E) represents the long-term utilization expected to meet customer demand. 
A) hides the amount of unused capacity. 
B) represents the maximum units of production for current capacity. 
C) provides the best cost estimate for benchmarking purposes. 
D) when used for product costing results in the lowest cost estimate of the four capacity options. 
E) represents the long-term utilization expected to meet customer demand.

Question 9

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

Accepted Answer

A) production-volume variance. 
B) sales volume variance. 
C) normal capacity utilization. 
D) theoretical capacity utilization. 
E) planned unused capacity. 
A) production-volume variance. 
B) sales volume variance. 
C) normal capacity utilization. 
D) theoretical capacity utilization. 
E) planned unused capacity.

Question 10

Sierra Tool Manufacturing Ltd.manufactures hammers at their Hamilton facility.For next month the vice-president of production plans on producing 2,700 hammers per day.The company can produce as many as 4,000 hammers per day,but are more likely to produce 3,500 per day.The demand for wrenches for the next three years is expected to average 3,100 wrenches per day.Fixed manufacturing costs per month total $282,400.The company works 22 days a month due to local zoning restrictions.Fixed manufacturing overhead is charged on a per wrench basis.
Required:
a.What is the theoretical fixed manufacturing overhead rate per wrench?
b.What is the practical fixed manufacturing overhead rate per wrench?
c.What is the normal fixed manufacturing overhead rate per wrench?
d.What is the master-budget fixed manufacturing overhead rate per wrench?

Accepted Answer

a.Theoretical overhead rate = $282,400/(

Question 11

One possible means of determining the difference between absorption and variable costing based operating incomes is

Accepted Answer

A) to add fixed manufacturing cost to the variable costing operating income. 
B) by subtracting the variable overhead rate from the fixed overhead rate and then multiplying the difference by the number of units in inventory. 
C) by subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory. 
D) by multiplying the number of units produced by the budgeted fixed manufacturing overhead rate. 
E) by adding fixed manufacturing overhead in beginning inventory to income. 
A) to add fixed manufacturing cost to the variable costing operating income. 
B) by subtracting the variable overhead rate from the fixed overhead rate and then multiplying the difference by the number of units in inventory. 
C) by subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory. 
D) by multiplying the number of units produced by the budgeted fixed manufacturing overhead rate. 
E) by adding fixed manufacturing overhead in beginning inventory to income.

Question 12

Using practical capacity is best for evaluating the marketing manager's performance for a particular year.

Accepted Answer

A) True 
 B)False

Question 13

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 absorption costing?

Accepted Answer

A) 5,625 units 
B) 6,667 units 
C) 769 units 
D) 8,000 units 
E) 7,693 units 
A) 5,625 units 
B) 6,667 units 
C) 769 units 
D) 8,000 units 
E) 7,693 units

Question 14

The heart of the difference between variable and absorption costing for financial reporting is accounting for fixed manufacturing and variable non-manufacturing costs.

Accepted Answer

A) True 
 B)False

Question 15

The manager of the manufacturing division of Winnipeg Windows does not understand why gross margin went down in February when sales went up.Some of the information she has selected for evaluation include:
   
The division operated at normal capacity during January.Variable manufacturing cost per unit was $5,and the fixed manufacturing costs were $400,000.Selling and administrative expenses were all fixed.
Required:
Explain why the gross margin in February was lower than January even though February sales were higher.How would variable costing income statements help the manager understand the division's operating income?

Accepted Answer

The difference is caused by the 10,000 u

Question 16

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

Accepted Answer

A) $11,500 
B) $20,000 
C) $10,000 
D) $10,500 
E) $9,500 
A) $11,500 
B) $20,000 
C) $10,000 
D) $10,500 
E) $9,500

Question 17

Use the information below to answer the following question(s).
Beauty Supply Company manufactures shampoo.The supervisor 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.
-What is the per unit variable cost?

Accepted Answer

A) $22.00 
B) $18.00 
C) $14.00 
D) $12.00 
E) $11.00 
A) $22.00 
B) $18.00 
C) $14.00 
D) $12.00 
E) $11.00

Question 18

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 absorption costing if the production units are actually 25,000?

Accepted Answer

A) 5,625 units 
B) 6,667 units 
C) 7,667 units 
D) 8,847 units 
E) 1,154 units 
A) 5,625 units 
B) 6,667 units 
C) 7,667 units 
D) 8,847 units 
E) 1,154 units

Question 19

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.
-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 20

Explain how using master-budget capacity utilization for setting prices can lead to a downward demand spiral.

Accepted Answer

If master-budget capacity utilization is

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

Briefly discuss two methods of reducing the undesirable incentives associated with the use of absorption costing to evaluate the performance of a plant manager.

If 400 units are produced and 600 units are sold,________ results in the greatest amount of operating income.

The marketing manager's performance evaluation is most fair when based on a denominator level using

Normal capacity utilization is not the same as master-budget capacity utilization.

Master-budget capacity utilization

One possible means of determining the difference between absorption and variable costing based operating incomes is

Using practical capacity is best for evaluating the marketing manager's performance for a particular year.

The heart of the difference between variable and absorption costing for financial reporting is accounting for fixed manufacturing and variable non-manufacturing costs.

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

Explain how using master-budget capacity utilization for setting prices can lead to a downward demand spiral.

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

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

Briefly discuss two methods of reducing the undesirable incentives associated with the use of absorption costing to evaluate the performance of a plant manager.

If 400 units are produced and 600 units are sold,________ results in the greatest amount of operating income.

The marketing manager's performance evaluation is most fair when based on a denominator level using

Normal capacity utilization is not the same as master-budget capacity utilization.

Master-budget capacity utilization

One possible means of determining the difference between absorption and variable costing based operating incomes is

Using practical capacity is best for evaluating the marketing manager's performance for a particular year.

The heart of the difference between variable and absorption costing for financial reporting is accounting for fixed manufacturing and variable non-manufacturing costs.

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

Explain how using master-budget capacity utilization for setting prices can lead to a downward demand spiral.

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