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Exam 20: Variable Costing for Management Analysis

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Question 71

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Service firms can only have one activity base for analyzing changes in costs.

A) True
B) False

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verified

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Question 72

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Variable costing is also known as direct costing.

A) True
B) False

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Question 73

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In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:

The actual price for a product was $50 per unit, while the planned price was $44 per unit. The volume increased by 4,000 to 60,000 total units. Determine (a) the quantity factor and (b) the price factor for sales.

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

Companies prepare contribution margin reports by market segments and product segments because products contribute to profitability in various ways.

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.

Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption costing concept.

Contribution margin reporting can be beneficial for analyzing, which of the following?

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.

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

In the long run, for a business to remain in operation, the selling price of a product should normally cover all costs and expenses and provide a reasonable income.

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

Gyro Company manufactures Products T and W and is operating at full capacity. To manufacture Product W requires three times the number of machine hours required for Product T. Market research indicates that 1,000 additional units of Product W could be sold. The contribution margin by unit of product is as follows: Calculate the increase or decrease in total contribution margin if 1,000 additional units of Product W are produced and sold.

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

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

The level of inventory of a manufactured product has increased by 7,000 units during a period. The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in unit sales price or cost, is termed the quantity factor.

Under variable costing, which of the following costs would 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 unit price or unit cost factor.