Accounting Ch. 21 Study
Dawson Company incurred the following costs while producing 200 chairs: Units produced 200 chairs Direct materials $20 per unit Direct labor $25 per unit Variable manufact. $4 per unit overhead Total fixed manufact. $3,000 overhead Variable selling & $5 per unit administrative Fixed selling & $4,000 administrative What is the ending balance in Finished Goods Inventory using variable costing if 170 units are sold (assume no beginning inventory in Finished Goods Inventory)? a) $1,470 b) $1,500 c) $1,200 d) $1,920
Answer: a) $1,470 Variable costing = Direct materials = Direct labor + Variable manufact. overhead = $20 + $25 + $4 = $49 There are 30 units left in ending inventory (200 units produced - 170 units sold) 30 units * $49 cost per unit = $1,470 in Finished Goods Inventory
Dawson Company incurred the following costs while producing 200 chairs: Units produced 200 chairs Direct materials $20 per unit Direct labor $25 per unit Variable manufact. $4 per unit overhead Total fixed manufact. $3,000 overhead Variable selling & $5 per unit administrative Fixed selling & $4,000 administrative What is the operating income using absorption costing if 90 units were sold for $250 each? a) $12,290 b) $22,500 c) $16,740 d) $5,760
Answer: a) $12,290 Sales Cost of Goods Sold Gross Profit Selling & Administrative Variable S&A Fixed S&A Operating Income $22,500 (90 units * $250) $5,760 (90 units * $64) $16,740 $450 (90 units * $5) $4,000 $12,290 Cost of Goods Sold = $20 + $25 + $4 + $15 = $64 Fixed manufacturing of $15 = $3,000 / 200 chairs produced = $15
Jones Company incurred the following costs while producing 100 chairs: Units Produced 100 chairs Direct Materials $10 per unit Direct Labor $15 per unit Variable Manufac. $3 per unit Overhead Total Fixed Manufac. $2,000 Overhead Variable Selling & $4 per unit Administrative Fixed Selling & $8,000 Administrative What is the unit product cost using absorption costing? a) $48 b) $28 c) $32 d) $25
Answer: a) $48 Absorption costing = Direct materials + Direct labor + Variable manufact. overhead + Fixed manufact. overhead = $10 + $15 + $3 + ($2,000 / 100 chairs) = $48
Jones Company incurred the following costs while producing 100 chairs: Units Produced 100 chairs Direct Materials $10 per unit Direct Labor $15 per unit Variable Manufac. $3 per unit Overhead Total Fixed Manufac. $2,000 Overhead Variable Selling & $4 per unit Administrative Fixed Selling & $3,000 Administrative What is the ending balance in Finished Goods Inventory using variable costing if 75 units are sold (assume no beginning inventory in Finished Goods Inventory)? a) $700 b) $1,200 c) $625 d) $1,500
Answer: a) $700 Variable costing = direct materials + direct labor + variable manufact. overhead = $10 + $15 + $3 = $28 25 units left in ending inventory (100 units produced - 75 units sold) 25 units * $28 cost per unit = $700 in Finished Goods Inventory
Assumes ABC Company had 50 units in beginning Finished Goods Inventory and sold 1,213 units. Additional data includes: Units produced 1,200 units Direct materials $12 per unit Direct labor $8 per unit Variable manufact. $2 per unit overhead Fixed manufact. $7 per unit overhead Using variable costing, what is the dollar amount of ending Finished Goods Inventory? a) $814 b) $1,073 c) $740 d) $800
Answer: a) $814 Variable costing = direct materials + direct labor + variable manufact. overhead = $12 + $8 + $2 = $22 Finished goods, = beginning finished goods + units produced - units sold = 50 + 1,200 - 1,213 = 37 units $22 cost per unit * 37 units = $814 in ending Finished Goods Inventory
Smith Company sells hot tub covers. The price of a cover is $200. Variable product costs are $120 per unit and commissions are $10 per unit. Fixed overhead is $20,000. 2,000 units were produced and sold. Smith Company's contribution margin ratio is: a) 35% b) 40% c) 60% d) 65%
Answer: a) 35% Variable costs are $120 + $10 in sales commissions = $130 Contribution margin ratio is ($200 selling price - $130 total variable costs) / $200 selling price = 35%
Which method is required by GAAP for external financial statements? a) Absorption costing b) Both absorption and variable c) Variable costing d) Neither absorption or variable
Answer: a) Absorption costing
Jones Company sells an average of 200 chairs per week, of which 30% are regular chairs and 70% are executive chairs. Regular chairs sell for $100 each and incur variable costs of $62. Executive chairs sell for $170 each and incur variable costs for $125. Which type of chair should Jones Company promote to maximize profits? a) executive chair because it contributes the highest contribution margin b) regular chair because it contributes the highest contribution margin c) cannot determine from information given d) both should be promoted equally
Answer: a) executive chair because it contributes the highest contribution margin The contribution margin on the executive chair is $45 per chair ($170 selling price - $125 variable cost per unit) The contribution margin on the regular chair is $38 per chair ($100 selling price - $62 variable cost per unit)
Jones Company sells an average of 200 chairs per week, of which 30% are regular chairs and 70% are executive chairs. Regular chairs sell for $100 each and incur variable costs of $62. Executive chairs sell for $170 each and incur variable costs for $125. The contribution margin per unit and total contribution margin for regular chairs is: a) $45 per unit and $17,500 total b) $38 per unit and $2,280 total c) $38 per unit and $3,720 total d) $45 per unit and $6,300 total
Answer: b) $38 per unit and $2,280 total Take $100 selling price - $62 variable cost per chair = $38 contribution margin per chair Next, 200 units sold * 30% = 60 regular chairs sold 60 regular chairs sold * $38 contribution margin per chair = $2,280 contribution margin
Jones Company incurred the following costs while producing 100 chairs: Units Produced 100 chairs Direct Materials $10 per unit Direct Labor $15 per unit Variable Manufac. $3 per unit Overhead Total Fixed Manufac. $2,000 Overhead Variable Selling & $4 per unit Administrative Fixed Selling & $3,000 Administrative What is the operating income using variable costing if 90 units were sold for $150 each? a) $5,820 b) $5,620 c) $4,840 d) $7,620
Answer: b) $5,620 Sales Variable Costs: Variable Cost of Goods Sold Variable S&A Contribution Margin Fixed Costs: Fixed Manufacturing overhead Fixed S&A Operating Income $13,500 (90 units * $150) $2,520 (90 units * $28) $360 (90 units * $4) $10,620 $2,000 $3,000 $5,620 Cost of Goods Sold = $10 + $15 + $3 = $28
What is the primary difference when calculating the cost per unit between the variable costing and absorption costing? a) variable costing includes fixed selling and administrative as a product cost b) absorption costing includes fixed manufacturing overhead as a product cost c) variable costing includes fixed manufacturing overhead as a product cost d) absorption costing includes fixed selling and administrative as a product cost
Answer: b) absorption costing includes fixed manufacturing overhead as a product cost Fixed manufacturing isn't a part of the product cost in variable costing Fixed selling & administrative costs aren't a part of the product cost in absorption or variable since they are period costs
Dawson Company incurred the following costs while producing 200 chairs: Units produced 200 chairs Direct materials $20 per unit Direct labor $25 per unit Variable manufact. $4 per unit overhead Total fixed manufact. $3,000 overhead Variable selling & $5 per unit administrative Fixed selling & $4,000 administrative What is the ending balance in Finished Goods Inventory using absorption costing if 180 units are sold (assume no beginning inventory in Finished Goods Inventory)? a) $960 b) $750 c) $1,280 d) $5,400
Answer: c) $1,280 Absorption costing = direct materials + direct labor + variable manufact. overhead + fixed manufact. overhead = $20 + $25 + $4 + ($3,000 / 200 chairs) = $64 20 units left in ending inventory (200 units produced - 180 units sold) 20 units * $64 cost per unit = $1,280 in Finished Goods Inventory
Dawson Company incurred the following costs while producing 200 chairs: Units produced 200 chairs Direct materials $20 per unit Direct labor $25 per unit Variable manufact. $4 per unit overhead Total fixed manufact. $3,000 overhead Variable selling & $5 per unit administrative Fixed selling & $4,000 administrative What is the operating income using variable costing if 100 units were sold for $250 each? a) $25,000 b) $19,600 c) $12,600 d) $5,400
Answer: c) $12,600 Sales Variable Costs: Variable Cost of Goods Sold Variable S&A Contribution Margin Fixed Costs: Fixed Manufacturing Fixed S&A Operating Income $25,000 (100 units * $250) $4,900 (100 units * $49) $500 (100 units * $5) $19,600 $3,000 $4,000 $12,600 Variable Cost of Goods Sold: direct materials + direct labor + variable manufact. overhead = $20 + $25 + $4 = $49
Jones Company incurred the following costs while producing 100 chairs: Units Produced 100 chairs Direct Materials $10 per unit Direct Labor $15 per unit Variable Manufac. $3 per unit Overhead Total Fixed Manufac. $2,000 Overhead Variable Selling & $4 per unit Administrative Fixed Selling & $8,000 Administrative What is the unit product cost using variable costing? a) $48 b) $25 c) $28 d) $32
Answer: c) $28 Variable costing = Direct materials + Direct labor + variable manufacturing overhead = $10 + $15 + $3 = $28
Smith Taxi Service had the following information for the 160 customers served this month: Sales revenue $13,000 Variable costs $7,000 Contribution Margin $6,000 What is the variable cost per customer (to the nearest cent)? a) $37.50 b) $81.25 c) $43.75 d) More information is needed
Answer: c) $43.75 Divide total variable costs by customers $7,000 / 160 customers = $43.75
Jones Company incurred the following costs while producing 100 chairs: Units Produced 100 chairs Direct Materials $10 per unit Direct Labor $15 per unit Variable Manufac. $3 per unit Overhead Total Fixed Manufac. $2,000 Overhead Variable Selling & $4 per unit Administrative Fixed Selling & $8,000 Administrative What is the ending balance in Finished Goods Inventory using absorption costing if 80 units are sold (assume no beginning inventory in Finished Goods Inventory)? a) $560 b) $500 c) $960 d) $700
Answer: c) $960 Absorption costing = direct materials + direct labor + variable manufact. overhead + fixed manufact. overhead = $10 + $15 + $3 + ($2,000 / 100 chairs) = $48 20 units left in ending inventory (100 units produced - 80 units sold) 20 units * $48 cost per unit = $960 in Finished Goods Inventory
An identifiable part of the company for which financial information is available is called ________. a) the contribution margin b) the gross profit c) a business segment d) the profitability analysis
Answer: c) a business segment
Absorption costing income statements are prepared primarily for ________. a) investors b) creditors c) all listed d) government
Answer: c) all listed
Which statement is TRUE? a) a variable costing income statement calculates gross profit; an absorption costing income statement calculates contribution margin b) both variable costing and absorption costing income statements calculate contribution margin c) an absorption costing income statement calculates gross profit; a variable costing income statement calculates contribution margin d) both variable costing and absorption costing income statements calculate gross profit
Answer: c) an absorption costing income statement calculates gross profit; a variable costing income statement calculates contribution margin
Assumes ABC Company had 50 units in beginning Finished Goods Inventory and sold 1,213 units. Additional data includes: Units produced 1,200 units Direct materials $12 per unit Direct labor $8 per unit Variable manufact. $2 per unit overhead Fixed manufact. $7 per unit overhead Using absorption costing, what is the dollar amount of ending Finished Goods Inventory? a) $800 b) $814 c) $740 d) $1,073
Answer: d) $1,073 Absorption costing = direct materials + direct labor + variable manufact. overhead + fixed manufat. overhead = $12 + $8 + $2 + $7 = $29 per unit Calculate Finished Goods Inventory = beginning finished goods + units produced - units sold = 50 + 1,200 - 1,213 = 37 units Last, $29 cost per unit * 37 units = $1,073
Assumes Tiger Company had 60 units in beginning Finished Goods Inventory and sold 1,200 units. Additional data includes: Units produced 1,300 units Direct materials $13 per unit Direct labor $9 per unit Variable manufact. $3 per unit overhead Fixed manufact. $8 per unit overhead Using variable costing, what is the dollar amount of ending Finished Goods Inventory? a) $5,280 b) $1,050 c) $3,750 d) $4,000
Answer: d) $4,000 Variable costing = direct materials + direct labor + variable manufact. overhead = $13 + $9 + $3 = $25 Finished Goods Inventory = beginning finished goods + units produced - units sold = 60 + 1,300 - 1,200 = 160 units Take $25 cost per unit * 160 units in ending finished goods = $4,000 in ending Finished Goods Inventory
Jones Company incurred the following costs while producing 100 chairs: Units Produced 100 chairs Direct Materials $10 per unit Direct Labor $15 per unit Variable Manufac. $3 per unit Overhead Total Fixed Manufac. $2,000 Overhead Variable Selling & $4 per unit Administrative Fixed Selling & $3,000 Administrative What is the operating income using absorption costing if 80 units were sold for $150 each? a) $9,760 b) $6,440 c) $8,160 d) $4,840
Answer: d) $4,840 Sales Cost of Goods Sold Gross Profit Selling & Administrative Variable S&A Fixed S&A Operating Income $12,000 (80 units * $150) $3,840 (80 units * $48) $8,160 $320 (80 units * $4) $3,000 $4,840 Cost of Goods Sold = $10 + $15 + $3 + $20 = $48 Fixed manufacturing of $20 = $2,000 / 100 chairs produced = $20
Smith Taxi Service had the following information for the 160 customers served this month: Sales revenue $13,000 Variable costs $7,000 Contribution Margin $6,000 What is the average amount charged to each customer (to nearest cent)? a) $43.75 b) More information is needed c) $37.50 d) $81.25
Answer: d) $81.25 Divide sales by customers $13,000 / 160 customers = $81.25
Abby Cleaning Services planned to provide cleaning services to 50 customers for $30 per hour during the month. Each job was expected to take 4 hours. The company actually served 5 less customers than expected and spent an average on each job of 4.5 hours. What is Abby Cleaning Services revenue for the month? a) $75 more than expected b) $150 more than expected c) $150 less than expected d) $75 less than expected
Answer: a) $75 more than expected 50 customers * $30 per hour * 4 hours average per job = $6,000 Actual revenues were... 45 customers * $30 per hour * 4.5 hours average per job = $6,075 = 6,075 (actual) - 6,000 (expected) = 75
Assumes Tiger Company had 60 units in beginning Finished Goods Inventory and sold 1,200 units. Additional data includes: Units produced 1,300 units Direct materials $13 per unit Direct labor $9 per unit Variable manufact. $3 per unit overhead Fixed manufact. $8 per unit overhead Using absorption costing, what is the dollar amount of ending Finished Goods Inventory? a) $800 b) $5,280 c) $3,740 d) $4,000
Answer: b) $5,280 Absorption costing = Direct materials + Direct labor + Variable manufact. overhead + Fixed manufact. overhead = $13 + $9 + $3 + $8 = $33 per unit Finished Goods, = Beginning finished goods + units produced - units sold = 60 + 1,300 - 1,200 = 160 units $33 cost per unit * 160 units = $5,280 ending Finished Goods Inventory
Abby Cleaning Service had the following information for the 200 customers served this month: Sales Revenue $20,000 Variable Costs $8,000 What is the contribution margin ratio? a) 50% b) 35% c) 40% d) 60%
Answer: d) 60% Calculate contribution margin (difference between sales and variable costs) and divide it by sales = ($20,000 - $8,000) / $20,000 = 60%
