Question 1

The higher the denominator level,the ________.

Accepted Answer

A)  higher the budgeted fixed manufacturing cost rate 
B)  lower the amount of fixed manufacturing costs allocated to each unit produced 
C)  higher the favorable production-volume variance 
D)  more likely actual output will exceed the denominator level 
A)  higher the budgeted fixed manufacturing cost rate 
B)  lower the amount of fixed manufacturing costs allocated to each unit produced 
C)  higher the favorable production-volume variance 
D)  more likely actual output will exceed the denominator level

Question 2

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

Accepted Answer

Throughput costing is an inventory metho

Question 3

The manager of the manufacturing division of Iowa Windows does not understand why income went down when sales went up.Some of the information he has selected for evaluation include:
 $$\begin{array} { l r r } 
& \text { Ianuary } & \text { February } \
\text { Units produced } & 40,000 & 30,000 \
\text { Units sold } & 30,000 & 40,000 \
 & & \
\text { Sales } & \$ 600,000 & \$ 800,000 \
\text { Beginnuing inventory }& 0 & 150,000 \
\text { Cost of production } & 600,000 & 550,000 \
\text { Ending inventory } & 150,000 & 0 \
\text { Operating income } & 70,000 & 35,000
\end{array}$$ The division operated at normal capacity during January.
Variable manufacturing cost per unit was $5,and the fixed costs were $400,000.
Selling and administrative expenses were all fixed.
Required:
Explain the profit differences.How would variable costing income statements help the manager understand the division's operating income?

Accepted Answer

The 10,000 units in inventory being assi

Question 4

Fixed manufacturing costs included in cost of goods available for sale + the production-volume variance will always = total fixed manufacturing costs under absorption costing.

Accepted Answer

A) True 
 B)False

Question 5

For benchmarking purposes it is best to use master-budget capacity because all competitors use about the same about of capacity for production.

Accepted Answer

A) True 
 B)False

Question 6

Budgeted fixed manufacturing costs of a product using practical capacity ________.

Accepted Answer

A)  represents the cost per unit of supplying capacity 
B)  can result in setting selling prices that are not competitive 
C)  includes the cost of unused capacity 
D)  should be used to evaluate a marketing manager's performance in the current year 
A)  represents the cost per unit of supplying capacity 
B)  can result in setting selling prices that are not competitive 
C)  includes the cost of unused capacity 
D)  should be used to evaluate a marketing manager's performance in the current year

Question 7

Answer the following questions using the information below:
Jupiter Corporation incurred fixed manufacturing costs of $16,000 during 2015. Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 2,200 units.
Units sold total 1,900 units.
Variable cost per unit is $4.
Beginning inventory is zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.
-Under variable costing,the fixed manufacturing costs expensed on the income statement (excluding adjustments for variances)total ________.

Accepted Answer

A)  $16,000 
B)  $15,200 
C)  $14,400 
D)  0 
A)  $16,000 
B)  $15,200 
C)  $14,400 
D)  0

Question 8

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Accepted Answer

A)  Practical capacity 
B)  Theoretical capacity 
C)  Master-budget capacity utilization 
D)  Normal capacity utilization 
A)  Practical capacity 
B)  Theoretical capacity 
C)  Master-budget capacity utilization 
D)  Normal capacity utilization

Question 9

Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

Accepted Answer

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

Question 10

Gloria's Decorating produces and sells a mantel clock for $100 per unit. In 2015, 42,125 clocks were produced and 37,958 were sold. Other information for the year includes:
 $\begin{array}{ll}
\text { Direct materials } & \$ 40.00 \text { per unit } \
\text { Direct manufacturing labor } & \$ 5.00 \text { per unit } \
\text { Variable manufacturing costs } & \$ 7.50 \text { per unit } \
\text { Sales commissions } & \$ 12.50 \text { per part } \
\text { Fixed manufacturing costs } & \$ 62.50 \text { per unit } \
\text { Administrative expenses all fixed } & \$ 37.50 \text { per unit }
\end{array}$
-What is the inventoriable cost per unit using absorption costing?

Accepted Answer

A)  $45.00 
B)  $52.50 
C)  $115.00 
D)  $80.00 
A)  $45.00 
B)  $52.50 
C)  $115.00 
D)  $80.00

Question 11

Under variable costing,lease charges paid on the factory building is an inventoriable cost.

Accepted Answer

A) True 
 B)False

Question 12

The contribution-margin format is used for ________.

Accepted Answer

A)  variable costing income statement 
B)  mixed costing income statement 
C)  absorption costing income statement 
D)  job order costing income statement 
A)  variable costing income statement 
B)  mixed costing income statement 
C)  absorption costing income statement 
D)  job order costing income statement

Question 13

Under absorption costing,managers can increase operating income by holding less inventories at the end of the period.

Accepted Answer

A) True 
 B)False

Question 14

Product-sustaining costs in activity-based costing are similar to ________.

Accepted Answer

A)  mixed costs 
B)  variable costs 
C)  semi-variable costs 
D)  fixed costs 
A)  mixed costs 
B)  variable costs 
C)  semi-variable costs 
D)  fixed costs

Question 15

Match each of the following items with one or more of the denominator-level capacity concepts by putting the appropriate letter(s)by each item:
a.Theoretical capacity
b.Practical capacity
c.Normal capacity utilization
d.Master-budget capacity utilization
1.Reduces theoretical capacity by considering unavoidable operating interruptions
2.Producing at full efficiency all the time
3.Measures capacity levels in terms of demand
4.Level of capacity utilization that satisfies average customer demand over a period
5.Does not allow for plant maintenance
6.Engineering and human resource factors are important when estimating capacity
7.Level of capacity utilization that managers expect for the current budget period
8.Ideal goal of capacity utilization
9.Takes into account seasonal,cyclical,and trend factors
10.Measures capacity levels in terms of what a plant can supply

Accepted Answer

1.b
2.a
3.

Question 16

Aspen Manufacturing Company sells its products for $33 each.The current production level is 50,000 units,although only 40,000 units are anticipated to be sold.
Unit manufacturing costs are:
 $$\begin{array} { l c } 
\text { Direct materials } & \$ 6.00 \
\text { Direct manufacturing labor } & \$ 9.00 \
\text { Variable manufacturing costs } & \$ 4.50 \
\text { Total fixed manufacturing costs } & \$ 180,000 \
\text { Marketing expenses } & \$ 3.00 \text { per unit, plus } \$ 100,000 \text { per year }
\end{array}$$ Required:
a.Prepare an income statement using absorption costing.
b.Prepare an income statement using variable costing.

Accepted Answer

The answer of Aspen Manufacturing Company sells its products for...

Question 17

Variable costing regards fixed manufacturing overhead as a(n)________.

Accepted Answer

A)  administrative cost 
B)  inventoriable cost 
C)  period cost 
D)  product cost 
A)  administrative cost 
B)  inventoriable cost 
C)  period cost 
D)  product cost

Question 18

Answer the following questions using the information below:

Ms. Janice Meyers, the company president, has heard that there are multiple breakeven 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 2011 is as follows:
 
-What are breakeven 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)  7,931 units 
A)  5,625 units 
B)  6,667 units 
C)  7,667 units 
D)  7,931 units

Question 19

The basis of the difference between variable costing and absorption costing is how fixed manufacturing costs are accounted for.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  Practical capacity 
B)  Theoretical capacity 
C)  Normal capacity 
D)  Demand capacity 
A)  Practical capacity 
B)  Theoretical capacity 
C)  Normal capacity 
D)  Demand capacity

The higher the denominator level,the ________.

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

Fixed manufacturing costs included in cost of goods available for sale + the production-volume variance will always = total fixed manufacturing costs under absorption costing.

For benchmarking purposes it is best to use master-budget capacity because all competitors use about the same about of capacity for production.

Budgeted fixed manufacturing costs of a product using practical capacity ________.

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

Under variable costing,lease charges paid on the factory building is an inventoriable cost.

The contribution-margin format is used for ________.

Under absorption costing,managers can increase operating income by holding less inventories at the end of the period.

Product-sustaining costs in activity-based costing are similar to ________.

Variable costing regards fixed manufacturing overhead as a(n)________.

The basis of the difference between variable costing and absorption costing is how fixed manufacturing costs are accounted for.

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

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters

Exam 9: Inventory Costing and Capacity Analysis

The higher the denominator level,the ________.

What is throughput costing? What advantages is it purported to have over variable and absorption costing?

Fixed manufacturing costs included in cost of goods available for sale + the production-volume variance will always = total fixed manufacturing costs under absorption costing.

For benchmarking purposes it is best to use master-budget capacity because all competitors use about the same about of capacity for production.

Budgeted fixed manufacturing costs of a product using practical capacity ________.

________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

Under variable costing,lease charges paid on the factory building is an inventoriable cost.

The contribution-margin format is used for ________.

Under absorption costing,managers can increase operating income by holding less inventories at the end of the period.

Product-sustaining costs in activity-based costing are similar to ________.

Variable costing regards fixed manufacturing overhead as a(n)________.

The basis of the difference between variable costing and absorption costing is how fixed manufacturing costs are accounted for.

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

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, direct-Cost Variances, and Management Control

Flexible Budgets, overhead Cost Variances, and Management Control

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, transfer Pricing, and Multinational Considerations

Performance Measurement, compensation, and Multinational Considerations

Filters