CH 7

Blissful Breeze manufactures and sells ceiling fans. Variable selling and administrative expense is $11.50 per fan and fixed selling and administrative expense is $7,800 per month. If Blissful Breeze produces 900 fans and sells 842 fans this month, total selling and administrative expenses will be $

$17,483

Granny's Touch manufactures and sells cookbooks. The company's variable cost of goods sold is $39,200 and variable selling and administrative expense is $6,200. Fixed manufacturing overhead is $19,700 and fixed selling and administrative expense is $9,290. An income statement prepared using variable costing shows $

$28,990

Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. This month 1,490 bottles were produced and 1,203 bottles were sold. Total cost of goods sold is:

$5.38 × 1,203 = $6,472.14

Frames, Inc. manufactures large wooden picture frames. Each frame requires $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame produced. The unit product cost of each frame using variable costing is $

$68

Blissful Breeze manufactures and sells ceiling fans. Each fan has a unit product cost of $112 and a unit selling price of $190. If Blissful Breeze produces 900 fans and sells 842 fans this month, the total cost of goods sold will be $

$94,304

Citrus Scents produces body sprays. Variable selling and administrative expense is $1.05 per bottle and fixed selling and administrative expense is $4,500 per month. If 1,490 bottles are produced and 1,203 are sold in July, total selling and administrative expense for the month will be:

($1.05 × 1,203) + $4,500 = $5,763.15

The Quaint Quilt produces and sells handmade quilts. Variable manufacturing costs total $140 per quilt. Fixed manufacturing overhead totals $68,250 per quarter. Variable selling and administrative costs are $19 per quilt sold, and fixed selling and administrative costs are $50,000 per quarter. Last quarter, the company produced 910 quilts and sold 780 quilts. The total variable cost reported on Quaint Quilt's variable costing income statement is:

($140 + $19) × 780 quilts sold = $124,020

Product costs under absorption costing include:

- variable manufacturing overhead - fixed manufacturing overhead - direct materials - direct labor

Put'er There manufactures baseball gloves. Each glove requires $22 of direct materials and $18 of direct labor. Variable manufacturing overhead cost is $7 per unit. Variable selling and administrative costs are $11 per unit sold and fixed selling and administrative costs are $13,200. The unit product cost using variable costing is ___ per unit

Unit product cost = $22 + $18 + $7 = $47. Selling and administrative costs are never considered part of product cost.

For external reporting, income statements are generally prepared using __________ costing, while _________ costing is used for internal decision making purposes.

absorption ; variable

Fixed manufacturing overhead costs are included as part of Work in Process inventory unde

absorption costing only

Selling and administrative expenses

are always treated as period costs

Under absorption costing product costs consist of ______ costs.

both variable and fixed manufacturing

Variable costing income statements are based upon a ______ format.

contribution margin

Variable costing net income may be computed by multiplying the number of units sold by the __________ _________ per unit and subtracting total _______ expenses

contribution margin ; fixed

When using variable costing, fixed manufacturing overhead is:

expensed in the period incurred

Absorption and variable costing net income are usually different due to the accounting fo

fixed manufacturing overhead

Under variable costing the cost of a unit of inventory does NOT contain

fixed manufacturing overhead

The difference between reported net income on variable costing and absorption costing income statements is based on how

fixed overhead is accounted for

Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as ______ costs.

period

A company's operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known a

segment

A part or activity within an organization about which managers would like cost, revenue or profit data is called a(n)

segment

Variable costing income statements separate __________ expenses from __________ expenses

variable ; fixed