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Exam 5: Variable Costing for Management Analysis

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Question 81

True/False

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For short-run production planning, information in the variable costing format is more useful to management than is information in the absorption costing concept format.

A) True
B) False

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Question 82

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Under variable costing, which of the following costs would be included in finished goods inventory?

A) salary of salesperson
B) salary of vice-president of finance
C) wages of carpenters in a furniture factory
D) straight-line depreciation on factory equipment

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

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Question 83

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Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affect the amount of income from operations reported under absorption costing.

A business operated at 100% of capacity during its first month and incurred the following costs: If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet?

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

If variable cost of goods sold totaled $80,000 for the year 16,000 units at $5.00 each and the planned variable cost of goods sold totaled $86,250 15,000 units at $5.75 each, the effect of the unit cost factor on the change in contribution margin is:

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

Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.

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.

What is the amount of the contribution margin that would be reported on the variable costing income statement?

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

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields manufacturing margin.

If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is the manufacturing cost per unit if: a 20,000 units are manufactured and the company uses the variable costing concept? b 25,000 units are manufactured and the company uses the variable costing concept? c 20,000 units are manufactured and the company uses the absorption costing concept? d 25,000 units are manufactured and the company used the absorption costing concept?

Under absorption costing, the cost of finished goods includes direct materials, direct labor, and all factory overhead.

Match -Treats fixed manufacturing cost as a period cost.

In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales price or unit cost, is referred to as the:

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

At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000.Sales are estimated to be 4,000 units.a How much would absorption costing income from operations differ between a plan to produce 8,000 units and a plan to produce 10,000 units? b How much would variable costing income from operations differ between the two production plans?

Match -Treats fixed selling cost as a period cost.