Question 1

In contribution margin analysis, the quantity factor is computed as:

Accepted Answer

A)  the increase or decrease in the number of units sold multiplied by the planned unit sales price or unit cost 
B)  the increase or decrease in unit sales price or unit cost multiplied by the planned number of units to be sold 
C)  the increase or decrease in the number of units sold multiplied by the actual unit sales price or unit cost 
D)  the increase or decrease in the unit sales price or unit cost multiplied by the actual number of units sold

Question 2

For an accounting period during which the quantity of inventory at the end was smaller than the quantity at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

Accepted Answer

A) True 
 B)False

Question 3

In contribution margin analysis, the unit price or unit cost factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

Accepted Answer

A) True 
 B)False

Question 4

Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

Accepted Answer

A) True 
 B)False

Question 5

A business operated at 100% of capacity during its first month, with the following results:  What is the amount of the manufacturing margin that would be reported on the variable costing income statement?

Accepted Answer

A)  $30,000 
B)  $38,000 
C)  $56,000 
D)  $44,000

Question 6

In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number of units sold is referred to as the:

Accepted Answer

A)  sales factor 
B)  cost of goods sold factor 
C)  quantity factor 
D)  unit price or unit cost factor

Question 7

MATCHING
-Generally provides the most useful report for controlling costs.

Accepted Answer

A) Absorption costing only 
B) Variable costing only 
C) Both absorption and variable costing

Question 8

The contribution margin ratio is computed as contribution margin divided by sales.

Accepted Answer

A) True 
 B)False

Question 9

Under absorption costing, which of the following costs would not be included in finished goods inventory?

Accepted Answer

A)  hourly wages of assembly worker 
B)  straight-line depreciation on factory equipment 
C)  overtime wages paid to factory workers 
D)  the salaries for salespeople

Question 10

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the quantity factor.

Accepted Answer

A) True 
 B)False

Question 11

A business operated at 100% of capacity during its first month and incurred the following costs:  If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?

Accepted Answer

A)  $100,800 
B)  $100,000 
C)  $114,800 
D)  $140,000

Question 12

Which of the following would be included in the cost of a product manufactured according to absorption costing?

Accepted Answer

A)  advertising expense 
B)  sales salaries 
C)  depreciation expense on factory building 
D)  office supplies costs

Question 13

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

Accepted Answer

A)  Absorption costing 
B)  Differential costing 
C)  Standard costing 
D)  Variable costing

Question 14

If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is profitable to increase the sales of that product with the lowest contribution margin.

Accepted Answer

A) True 
 B)False

Question 15

For a period during which the quantity of product manufactured exceeded the quantity sold, income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

Accepted Answer

A) True 
 B)False

Question 16

Tony's Company has the following information for March: $$\begin{array} { | l | c | } 
\hline \text { Sales } & \$ 1,000,000 \
\hline \text { Variable cost of goods sold } & 490,000 \
\hline \text { Fixed manufacturing costs } & 170,000 \
\hline \text { Variable selling and administrative expenses } & 112,000 \
\hline \text { Fixed selling and admini strative expenses } & 100,000 \
\hline
\end{array}$$ Determine the March a) manufacturing margin, b) contribution margin, and c) income from operations for Tony's Company.

Accepted Answer

The answer of Tony's Company has the following information for...

Question 17

Which of the following statements is correct using the direct costing concept?

Accepted Answer

A)  All manufacturing costs are included in the calculation of cost of goods manufactured. 
B)  Only fixed costs are included in the calculation of cost of goods manufactured while variable costs are considered period costs. 
C)  Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs. 
D)  All manufacturing costs are considered period costs.

Question 18

Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would be included in the cost of a product manufactured according to variable costing?

Accepted Answer

A)  sales commissions 
B)  office supply costs 
C)  interest expense 
D)  direct materials

Question 20

If variable selling and administrative expenses totaled $120,000 for the year 80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each), the effect of the unit cost factor on the change in contribution margin is:

Accepted Answer

A)  $19,500 decrease 
B)  $19,500 increase 
C)  $20,000 decrease 
D)  $20,000 increase

Exam 20: Variable Costing for Management Analysis

In contribution margin analysis, the quantity factor is computed as:

For an accounting period during which the quantity of inventory at the end was smaller than the quantity at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

In contribution margin analysis, the unit price or unit cost factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the manufacturing margin that would be reported on the variable costing income statement?

In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number of units sold is referred to as the:

MATCHING -Generally provides the most useful report for controlling costs.

The contribution margin ratio is computed as contribution margin divided by sales.

Under absorption costing, which of the following costs would not be included in finished goods inventory?

In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units sold is termed the quantity factor.

A business operated at 100% of capacity during its first month and incurred the following costs: If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?

Which of the following would be included in the cost of a product manufactured according to absorption costing?

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost?

If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is profitable to increase the sales of that product with the lowest contribution margin.

For a period during which the quantity of product manufactured exceeded the quantity sold, income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

Which of the following statements is correct using the direct costing concept?

Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept.

Which of the following would be included in the cost of a product manufactured according to variable costing?

If variable selling and administrative expenses totaled $120,000 for the year 80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each) , the effect of the unit cost factor on the change in contribution margin is: