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Exam 7: Variable Costing: a Tool for Management

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Question 71

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Roberts Company produces a single product. During the year just ended, the company's net operating income under absorption costing was $3,000 lower than under variable costing. The company sold 9,000 units during the year, and its variable costs were $9 per unit, of which $3 was variable selling expense. If production cost is $11 per unit under absorption costing every year, then how many units did the company produce during the year?

A) 8,000
B) 10,000
C) 9,600
D) 8,400

E) B) and C)
F) A) and D)

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Question 72

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Dewiel Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years: -What was the absorption costing net operating income this year?

A) $105,900
B) $115,500
C) $89,700
D) $109,500

E) None of the above
F) B) and D)

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Question 73

Multiple Choice

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Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the total period cost for the month under the variable costing approach?

If production exceeds sales for the period, variable costing net operating income will typically be greater than absorption costing net operating income.

Walsh Company produces a single product. Last year, the company manufactured 25,000 units and sold 22,000 units. Production costs were as follows: Sales totaled $440,000, variable selling and administrative expenses were $110,000, and fixed selling and administrative expenses were $45,000. There was no beginning inventory. Assume that direct labor is a variable cost. -Under variable costing, the total amount of fixed manufacturing cost in the ending inventory would be:

Pachur Company, which has only one product, has provided the following data concerning its most recent month of operations: The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. Required: a. What is the unit product cost for the month under variable costing? b. Prepare a contribution format income statement for the month using variable costing. c. Without preparing an income statement, determine the absorption costing net operating income for the month. (Hint: Use the reconciliation method.)

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:

Walsh Company produces a single product. Last year, the company manufactured 25,000 units and sold 22,000 units. Production costs were as follows: Sales totaled $440,000, variable selling and administrative expenses were $110,000, and fixed selling and administrative expenses were $45,000. There was no beginning inventory. Assume that direct labor is a variable cost. -The net operating income under variable costing would be:

Which of the following statements is true for a company that uses variable costing?

O'Bannion Company, which has only one product, has provided the following data concerning its most recent month of operations: Required: a. Prepare a contribution format income statement for the month using variable costing. b. Prepare an income statement for the month using absorption costing.

The costing method that can be used most easily with break-even analysis and other cost-volume-profit techniques is:

Net operating income computed using variable costing would exceed net operating income computed using absorption costing if:

Przygocki Inc., which produces a single product, has provided the following data for its most recent month of operation: The company had no beginning or ending inventories. Required: Compute the unit product cost under absorption costing. Show your work!

Under the absorption costing method, a company can increase profits by increasing production rather than by increasing sales.

Crystal Company produces a single product. The company's variable costing income statement for the month of May appears below: The company produced 80,000 units in May and the beginning inventory consisted of 25,000 units. Variable production costs per unit and total fixed costs have remained constant over the past several months. -Under absorption costing, for the month ended May 31, the company would report a:

Schubert Corporation manufactures a variety of products. Variable costing net operating income last year was $59,000 and this year was $70,000. Last year, $31,000 in fixed manufacturing overhead costs were released from inventory under absorption costing. This year, $22,000 in fixed manufacturing overhead costs were deferred in inventory under absorption costing. -What was the absorption costing net operating income last year?