Exam 9: Inventory Costing and Capacity Analysis

Under both variable and absorption costing,research and development costs are period costs.

In variable costing,all nonmanufacturing costs are subtracted from contribution margin.

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: Direct materials \ 40.00 per unit Direct manufacturing labor \ 5.00 per unit Variable manufacturing costs \ 7.50 per unit Sales commissions \ 12.50 per part Fixed manufacturing costs \ 62.50 per unit Administrative expenses all fixed \ 37.50 per unit -What is the inventoriable cost per unit using variable costing?

To discourage producing for inventory,management can ________.

Which of the following capacity levels do proponents of activity-based costing recommend to be used as the denominator level to calculate activity cost rates?

The choice of the capacity level used to allocate budgeted fixed manufacturing costs to products can greatly affect the product-cost information available to managers.

Which of the following measures capacity levels in terms of demand for the output of the plant?

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 using variable costing?

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?

In absorption costing,fixed manufacturing overhead is treated as a period cost.

The budgeted fixed manufacturing cost rate is the lowest for ________.

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 variable costing?

Which of the following costs is inventoried when using variable costing?

Managers cannot use human resource consideration to obtain a reliable estimate of the denominator level for the budget period as they cannot be quantified.

Johnson Realty bought a 2,000-acre island for $10,000,000 and divided it into 200 equal size lots. As the lots are sold,they are cleared at an average cost of $5,000. Storm drains and driveways are installed at an average cost of $8,000 per site. Sales commissions are 10% of selling price. Administrative costs are $850,000 per year. The average selling price was $160,000 per lot during 20X5 when 50 lots were sold. During 20X6,the company bought another 2,000-acre island and developed it exactly the same way.Lot sales in 20X6 totaled 300 with an average selling price of $160,000.All costs were the same as in 20X5. Required: Prepare income statements for both years using both absorption and variable costing methods.

There is no output-level variance for variable costing,when ________.

If the variable manufacturing overhead is $50 per unit for a company,the lowest budgeted manufacturing cost per unit can be obtained by using normal capacity utilization as the denominator level capacity.

The main difference between variable costing and absorption costing is the way in which fixed manufacturing costs are accounted for.

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 the contribution margin using variable costing?

Which of the following is true of normal capacity utilization?