Question 1

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.
  Units produced this year 25,000 units  Units sold this year 15,000 units  Direct materials $9 per unit  Direct labor $11 per unit  Variable overhead $75,000 in total  Fixed overhead $137,500 in total \begin{array} { l l } 	ext { Units produced this year } & 25,000 	ext { units } \	ext { Units sold this year } & 15,000 	ext { units } \	ext { Direct materials } & \$ 9 	ext { per unit } \	ext { Direct labor } & \$ 11 	ext { per unit } \	ext { Variable overhead } & \$ 75,000 	ext { in total } \	ext { Fixed overhead } & \$ 137,500 	ext { in total }\end{array} Units produced this year  Units sold this year  Direct materials  Direct labor  Variable overhead  Fixed overhead ​25,000 units 15,000 units $9 per unit $11 per unit $75,000 in total $137,500 in total ​ 
-Given Advanced Company's data, compute cost per unit of finished goods under variable costing.

Accepted Answer

A)   $20.00
B)   $25.00
C)   $21.88
D)   $23.00
E)   $28.50 F) C) and D)
G) A) and D)

Question 2

Aces, Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. At year-end, the company reported the following income statement using absorption costing. 
  Sales (4,900×$90) $441,000 Cost of goods sold (4,900×$38) 186,200 Gross margin $254,800 Selling and administrative 75,000 expenses  Net Income $179,800\begin{array}{lr}	ext { Sales }(4,900 	imes \$ 90)  & \$ 441,000 \	ext { Cost of goods sold }(4,900 	imes \$ 38)  & 186,200 \	ext { Gross margin } & \$ 254,800 \	ext { Selling and administrative } & 75,000\	ext { expenses }\	ext { Net Income }&\$179,800\end{array} Sales (4,900×$90)  Cost of goods sold (4,900×$38)  Gross margin  Selling and administrative  expenses  Net Income ​$441,000186,200$254,80075,000$179,800​  
Production costs per tennis racket total $38, which consists of $25 in variable production costs and $13 in fixed production costs (based on the 6,000 units produced) . Ten percent of total selling and administrative expenses are variable. Compute net income under variable costing.

Accepted Answer

A)   $194,100
B)   $165,500
C)   $311,000
D)   $240,500
E)   $233,000 F) C) and D)
G) C) and E)

Question 3

Under absorption costing, which of the following statements is not true?

Accepted Answer

A)   Over production and inventory buildup can occur because of how managers are evaluated and rewarded.
B)   The fixed costs per unit decline as more units are produced.
C)   Variable inventory costs are treated in the same manner as they are under variable costing.
D)   Fixed inventory costs are treated in the same manner as they are under variable costing.
E)   All manufacturing costs are assigned to products.F) B) and E)
G) D) and E)

Question 4

Which of the following best describes costs assigned to the product under the variable costing method? 
Direct labor (DL) 
Direct materials (DM) 
Variable selling and administrative
Variable manufacturing overhead
Fixed selling and administrative
Fixed manufacturing overhead

Accepted Answer

A)   DL, DM, variable selling and administrative costs and variable manufacturing overhead.
B)   DL, DM, and variable manufacturing overhead.
C)   DL, DM, variable manufacturing overhead, and fixed manufacturing overhead.
D)   DL and DM.
E)   DL, DM, fixed selling and administrative, and fixed manufacturing overhead.F) D) and E)
G) B) and E)

Question 5

Absorption costing is also called ________________________ costing.

Accepted Answer

The answer of Absorption costing is also called ________________________ costing....

Question 6

When evaluating a special order, management should

Accepted Answer

A)   Only accept the order if the incremental revenue exceeds all product costs.
B)   Only accept the order if the incremental revenue exceeds fixed product costs.
C)   Only accept the order if the incremental revenue exceeds total variable product costs.
D)   Only accept the order if the incremental revenue exceeds full absorption product costs.
E)   Only accept the order if the incremental revenue exceeds regular sales revenue.F) B) and E)
G) A) and B)

Question 7

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

Accepted Answer

A) True 
 B)False

Question 8

What is the general procedure for converting variable costing net income to absorption costing net income?

Accepted Answer

The general formula is variabl...

Question 9

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year.
  Units produced this year 25,000 units  Units sold this year 15,000 units  Direct materials $9 per unit  Direct labor $11 per unit  Variable overhead $75,000 in total  Fixed overhead $137,500 in total \begin{array} { l l } 	ext { Units produced this year } & 25,000 	ext { units } \	ext { Units sold this year } & 15,000 	ext { units } \	ext { Direct materials } & \$ 9 	ext { per unit } \	ext { Direct labor } & \$ 11 	ext { per unit } \	ext { Variable overhead } & \$ 75,000 	ext { in total } \	ext { Fixed overhead } & \$ 137,500 	ext { in total }\end{array} Units produced this year  Units sold this year  Direct materials  Direct labor  Variable overhead  Fixed overhead ​25,000 units 15,000 units $9 per unit $11 per unit $75,000 in total $137,500 in total ​ 
-Given Advanced Company's data, compute cost per unit of finished goods under absorption costing.

Accepted Answer

A)   $20.00
B)   $34.17
C)   $25.32
D)   $23.00
E)   $28.50 F) B) and C)
G) A) and E)

Question 10

Assume a company sells a given product for $90 per unit. How many units must be sold to break-even if variable selling costs are $2 per unit, variable production costs are $31 per unit, and total fixed costs are $1,799,946?

Accepted Answer

A)   31,578 units.
B)   19,995 units.
C)   20,454 units.
D)   14,634 units.
E)   899,973 units.F) A) and E)
G) B) and E)

Question 11

The use of absorption costing can result in misleading product cost information.

Accepted Answer

A) True 
 B)False

Question 12

Clear Company reports the following information for its first year of operations. 
  Units produced this year 50,000 units  Units sold this year 49,000 units  Direct materials $7 per unit  Direct labor $3 per unit  Variable overhead $210,000 in total  Fixed overhead ? in total \begin{array} { l l } 	ext { Units produced this year } & 50,000 	ext { units } \	ext { Units sold this year } & 49,000 	ext { units } \	ext { Direct materials } & \$ 7 	ext { per unit } \	ext { Direct labor } & \$ 3 	ext { per unit } \	ext { Variable overhead } & \$ 210,000 	ext { in total } \	ext { Fixed overhead } & ? 	ext { in total }\end{array} Units produced this year  Units sold this year  Direct materials  Direct labor  Variable overhead  Fixed overhead ​50,000 units 49,000 units $7 per unit $3 per unit $210,000 in total ? in total ​ 
If the company's cost per unit of finished goods using absorption costing is $19.30, what is total fixed overhead?

Accepted Answer

A)   $350,000
B)   $255,000
C)   $150,000
D)   $249,900
E)   $147,000 F) D) and E)
G) C) and D)

Question 13

Front Company had net income of $72,500 based on variable costing. Beginning and ending inventories were 800 units and 1,200 units, respectively. Assume the fixed overhead per unit was $7.90 for both the beginning and ending inventory. What is net income under absorption costing?

Accepted Answer

A)   $69,340
B)   $75,660
C)   $88,300
D)   $56,700
E)   $72,900F) A) and E)
G) C) and D)

Question 14

Cloudy Company reports the following information for the current year. 
  Units produced this year 51,000 units  Units sold this year 53,000 units  Direct materials $6 per unit  Direct labor $3 per unit  Variable overhead $255,000 in total  Fixed overhead ? in total \begin{array} { l l } 	ext { Units produced this year } & 51,000 	ext { units } \	ext { Units sold this year } & 53,000 	ext { units } \	ext { Direct materials } & \$ 6 	ext { per unit } \	ext { Direct labor } & \$ 3 	ext { per unit } \	ext { Variable overhead } & \$ 255,000 	ext { in total } \	ext { Fixed overhead } & ? 	ext { in total }\end{array} Units produced this year  Units sold this year  Direct materials  Direct labor  Variable overhead  Fixed overhead ​51,000 units 53,000 units $6 per unit $3 per unit $255,000 in total ? in total ​ 
If the company's cost per unit of finished goods using absorption costing is $18, what is total fixed overhead?

Accepted Answer

A)   $204,000
B)   $212,000
C)   $213,690
D)   $222,070
E)   $459,000 F) All of the above
G) A) and C)

Question 15

Castaway Company reports the following first year production cost information. $$\begin{array} { l l } 
\text { Units produced } & 53,000 \text { units } \
\text { Units sold } & 51,000 \text { units } \
\text { Sales price } & \$ 150 \text { per unit } \
\text { Direct labor } & \$ 8 \text { per unit } \
\text { Direct materials } & \$ 4 \text { per unit } \
\text { Variable overhead } & \$ 2,173,000 \text { in total } \
\text { Fixed overhead } & \$ 3,339,000 \text { in total } \
\text { Operating expenses } & \$ 1,000,000 \text { in total }
\end{array}$$
(a.) Determine the net income using variable costing.
(b.) Determine the net income using absorption costing.

Accepted Answer

(a.) Product cost: $8 DL + $4 DM + $2,17...

Question 16

During a given year, if a company sells more units than it produces, then ending inventory units will be less than beginning inventory units.

Accepted Answer

A) True 
 B)False

Question 17

A traditional product costing approach is referred to as ______________.

Accepted Answer

Absorption...

Question 18

A company is currently operating at 65% capacity producing 12,000 units. Cost information relating to this current production is shown in the table below.
The company has been approached by a customer with a request for a special order for 2,000 units. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?
 $$\begin{array} { | l | r | } 
\hline & \text { Per Unit } \
\hline \text { Sales price } & \$ 6 \
\hline \text { Direct material } & \$ 2.30 \
\hline \text { Direct labor } & \$ 0.87 \
\hline \begin{array} { l } 
\text { Variable } \
\text { overhead }
\end{array} & \$ 0.91 \
\hline \text { Fixed overhead } & \$ 0.70 \
\hline
\end{array}$$

Accepted Answer

12,000/.65 - 12,000 = 6,461 un...

Question 19

Chance, Inc. sold 3,000 units of its product at a price of $72 per unit. Total variable cost per unit is $51, consisting of $32 in variable production cost and $19 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

Accepted Answer

A)   $96,000
B)   $63,000
C)   $120,000
D)   $216,000
E)   ($90,000) F) B) and C)
G) A) and C)

Question 20

Red and White Company reported the following monthly data.
  Units produced 2,000 units  Sales price $25 per unit  Direct materials $1 per unit  Direct labor $2 per unit  Variable overhead $3 per unit  Fixed overhead $8,000 in total \begin{array} { l l } 	ext { Units produced } & 2,000 	ext { units } \	ext { Sales price } & \$ 25 	ext { per unit } \	ext { Direct materials } & \$ 1 	ext { per unit } \	ext { Direct labor } & \$ 2 	ext { per unit } \	ext { Variable overhead } & \$ 3 	ext { per unit } \	ext { Fixed overhead } & \$ 8,000 	ext { in total }\end{array} Units produced  Sales price  Direct materials  Direct labor  Variable overhead  Fixed overhead ​2,000 units $25 per unit $1 per unit $2 per unit $3 per unit $8,000 in total ​ 
-What is Red and White's net income under variable costing if 980 units are sold and operating expenses are $12,000:

Accepted Answer

A)   $(1,380) 
B)   $(2,000) 
C)   $2,700
D)   $6,620
E)   $10,620 F) A) and E)
G) None of the above

Exam 19: Variable Costing and Performance Reporting

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

Correct Answer
verified

Correct Answer
verified
12,000/.65 - 12,000 = 6,461 un...
View Answer

During a given year, if a company sells more units than it produces, then ending inventory units will be less than beginning inventory units.

Correct Answer
verified

Front Company had net income of $72,500 based on variable costing. Beginning and ending inventories were 800 units and 1,200 units, respectively. Assume the fixed overhead per unit was $7.90 for both the beginning and ending inventory. What is net income under absorption costing?

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative Variable manufacturing overhead Fixed selling and administrative Fixed manufacturing overhead

Correct Answer
verified

When evaluating a special order, management should

Correct Answer
verified

Correct Answer
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(a.) Product cost: $8 DL + $4 DM + $2,17...
View Answer

A traditional product costing approach is referred to as ______________.

Correct Answer
verified
Absorption...
View Answer

Chance, Inc. sold 3,000 units of its product at a price of $72 per unit. Total variable cost per unit is $51, consisting of $32 in variable production cost and $19 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

Correct Answer
verified

What is the general procedure for converting variable costing net income to absorption costing net income?

Correct Answer
verified
The general formula is variabl...
View Answer

Absorption costing is also called ________________________ costing.

Correct Answer
verified

The use of absorption costing can result in misleading product cost information.

Correct Answer
verified

Assume a company sells a given product for $90 per unit. How many units must be sold to break-even if variable selling costs are $2 per unit, variable production costs are $31 per unit, and total fixed costs are $1,799,946?

Correct Answer
verified

Correct Answer
verified

Under absorption costing, which of the following statements is not true?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Exam 19: Variable Costing and Performance Reporting

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

Correct AnswerverifiedShow Answer

Correct Answerverified12,000/.65 - 12,000 = 6,461 un...View AnswerShow Answer

During a given year, if a company sells more units than it produces, then ending inventory units will be less than beginning inventory units.

Correct AnswerverifiedShow Answer

Front Company had net income of $72,500 based on variable costing. Beginning and ending inventories were 800 units and 1,200 units, respectively. Assume the fixed overhead per unit was $7.90 for both the beginning and ending inventory. What is net income under absorption costing?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative Variable manufacturing overhead Fixed selling and administrative Fixed manufacturing overhead

Correct AnswerverifiedShow Answer

When evaluating a special order, management should

Correct AnswerverifiedShow Answer

Correct Answerverified(a.) Product cost: $8 DL + $4 DM + $2,17...View AnswerShow Answer

A traditional product costing approach is referred to as ______________.

Correct AnswerverifiedAbsorption...View AnswerShow Answer

Chance, Inc. sold 3,000 units of its product at a price of $72 per unit. Total variable cost per unit is $51, consisting of $32 in variable production cost and $19 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

Correct AnswerverifiedShow Answer

What is the general procedure for converting variable costing net income to absorption costing net income?

Correct AnswerverifiedThe general formula is variabl...View AnswerShow Answer

Absorption costing is also called ________________________ costing.

Correct AnswerverifiedShow Answer

The use of absorption costing can result in misleading product cost information.

Correct AnswerverifiedShow Answer

Assume a company sells a given product for $90 per unit. How many units must be sold to break-even if variable selling costs are $2 per unit, variable production costs are $31 per unit, and total fixed costs are $1,799,946?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Under absorption costing, which of the following statements is not true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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12,000/.65 - 12,000 = 6,461 un...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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(a.) Product cost: $8 DL + $4 DM + $2,17...
View Answer

Correct Answer
verified
Absorption...
View Answer

Correct Answer
verified

Correct Answer
verified
The general formula is variabl...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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