Exam 9: Inventory Costing and Capacity Analysis

Answer the following questions using the information below: Mariposa Corporation sells "Bigger", its only product. The following information is available for the current month: Selling price per unit \ 100 Standard fixed manufacturing costs per unit \ 50 Variable selling and administrative costs per unit \ 8 Standard variable manufacturing costs per unit \ 2 Fixed selling and administrative costs \ 40,000 Units produced 10,000 units Units sold 9,600 units -What is the absorption costing breakeven point in units?

Assume a manufacturing company that has started production in the current year.Which of the following would result in the highest profit being reported if the company has 1,000 units of ending inventory?

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

Answer the following questions using the information below: Daniel Rubber Company produces a specialty item. Management has provided the following information: Actual sales 110,000 units Budgeted production 100,000 units Selling price \ 40.00 per unit Direct material costs \ 8.00 per unit Variable manufacturing overhead \ 3.00 per unit Variable ad ministrative costs \ 5.00 per unit Fixed manufacturing overhead \ 4.00 per unit -What is the cost per statue if throughput costing is used?

Which of the following is true of master-budget capacity utilization?

Throughput costing provides less incentive to produce for inventory than either variable costing or,especially,absorption costing.

Zahra's Decoratives produces and sells a decorative pillow for $97.50 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: Variable manufacturing costs \ 22.10 per unit Variable marketing costs \ 3.90 per unit Fixed manufacturing costs \ 13.00 per unit Administrative expenses, all fixed \ 19.50 per unit Ending inventories: Direct materials -0- WIP -0- Finished goods 250 units -What is cost of goods sold per unit using variable costing?

Answer the following questions using the information below: Henry Inc., a manufacturing firm, is able to produce 1,000 pairs of sneakers per hour, at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable operating interruptions, production averages 800 units per hour. The plant actually operates only 27 days per month. Based on the current budget, Henry estimates that it will be able to sell only 500,000 units due to the entry of a competitor with aggressive marketing capabilities. But the demand is unlikely to be affected in future and will be around 515,000. Assume the month has 30 days. -What is the theoretical capacity for the month?

________ reduces theoretical capacity for unavoidable operating interruptions.

Explain three methods under absorption costing that managers can use to improve operating income.

When actual production is below practical capacity,there will be unused-capacity cost only in the manufacturing function and not in nonmanufacturing parts like distribution function.

Advocates of throughput costing maintain that ________.

Switching production to products that absorb the highest amount of fixed manufacturing costs is also called ________.

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

One possible means of determining the difference between operating incomes for absorption costing and variable costing is by ________.

The income under variable costing will always be the same as the income under absorption costing.

The following data are available for Brennan Soft Toys Company for the year ended September 30,2015. Sales: 24,000 units at \ 50 each Expected and actual production: 30,000 units Manufacturing costs incurred: Variable: \ 525,000 Fixed: \ 372,000 Nonmanufacturing costs incurred: Variable: \ 144,800 Fixed: \ 77,400 Beginning inventories: none Required: a.Determine operating income using the variable-costing approach. b.Determine operating income using the absorption-costing approach. c.Explain why operating income is not the same under the two approaches.

Fixed manufacturing overhead is a period cost both under variable costing and under absorption costing.

________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect)are included as inventoriable costs and all fixed manufacturing costs are excluded.

One of the most common problems reported by companies using variable costing is the difficulty of classifying costs into fixed or variable categories.