Exam 9: Income Effects of Denominator Level on Inventory Valuation

Answer the following question(s)using the information below. Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation,2,000 units were produced and 1,750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes: -What is cost of goods sold 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: -Which of the following criteria should be used to evaluate management according to critics of absorption costing?

Klein 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?

Sutton Hot Dog Stands sells hot dogs at ballparks across Canada for $1.35.Variable costs are $1.05 per unit with fixed production costs of $90,000 per month at a level of 400,000 units.Fixed administrative costs total $30,000.Sales average 400,000 units per month,with planned production of 400,000 hot dogs. Required: a.What are break-even unit sales under variable costing? b.What are break-even unit sales under absorption costing if she sells everything she prepares? c.What are break-even unit sales under absorption costing if average sales are 498,000 and planned production is changed to 500,000?

Answer the following question(s)using the information below. Marie's Decorating produces and sells a mantel clock for $100 per unit.In 2012,100,000 clocks were produced and 80,000 were sold.Other information for the year includes: -What is the inventoriable cost per unit using absorption costing?

Amalgamated Glass and Mirror Inc.had sales of 37,500 units and production of 50,000 units.Other information for the year included: 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.

Answer the following question(s)using the information below. Marie's Decorating produces and sells a mantel clock for $100 per unit.In 2012,100,000 clocks were produced and 80,000 were sold.Other information for the year includes: -What is the inventoriable cost per unit using variable costing?

Absorption costing prevents managers from increasing production to levels above customer demand,as a means of inflating operating income.

For the current year,Nichols Inc. ,had sales of 75,000 units and production of 100,000 units.Other information for the year included: 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.

Absorption costing defers the fixed manufacturing costs in ending inventory to a future period,but variable costing expenses these costs in the current period.

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

Throughput costing provides more incentive to produce inventory than does absorption costing.

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?

Off-limits idle capacity refers to the unused capacity in facilities that are not located on the company's primary location.

________ utilization is an average that provides no meaningful feedback to the marketing manager for a particular year.

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

Companies using absorption costing do not need to make any distinction between variable and fixed costs in their accounting system for inventory costing purposes.

Which of the following is TRUE concerning throughput costing?

Determining the "right" level of capacity is an important strategic decision.

Ace Products sells its products for $22 each.Unit manufacturing costs are: direct materials,$4.00;direct manufacturing labour,$6.00;and variable manufacturing overhead,$3.00.Total fixed manufacturing overhead costs are $60,000 and marketing expenses are $2.00 per unit plus $20,000 per year.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.