Managerial accounting
Variable costing only
Generally provides the most useful report for controlling costs.
Absorption costing only
Generally provides the most useful report for setting long-term prices.
$44,000 increase
The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $22.00 $11.00 Unit operating expenses of the period 7.00 5.00 What would be the effect on income from operations if absorption costing is used rather than variable costing? a. $44,000 decrease b. $44,000 increase c. $64,000 increase d. $64,000 decrease
wages of carpenters in a furniture factory
Under variable costing, which of the following costs would be included in finished goods inventory? a. advertising costs b. salary of vice-president of finance c. wages of carpenters in a furniture factory d. straight-line depreciation on factory equipment
fixed factory overhead cost
Under variable costing, which of the following costs would not be included in finished goods inventory? a. direct labor cost b. direct materials cost c. variable factory overhead cost d. fixed factory overhead cost
the maxiumum contribution margin
Management should focus its sales and production efforts on the product or products that will provide a. the highest sales revenue b. the lowest product costs c. the maxiumum contribution margin d. the lowest direct labor hours
controlling inventory levels
Management will use both variable and absorption costing in all of the following activities except: a. controlling costs b. product pricing c. production planning d. controlling inventory levels
variable selling and administrative expenses
On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is the: a. fixed manufacturing costs b. variable cost of goods sold c. fixed selling and administrative expenses d. variable selling and administrative expenses
variable and fixed selling and administrative expenses
Under absorption costing, which of the following costs would not be included in finished goods inventory? a. direct labor cost b. direct materials cost c. variable and fixed factory overhead cost d. variable and fixed selling and administrative expenses
advertising costs for a furniture manufacturer
Under absorption costing, which of the following costs would not be included in finished goods inventory? a. hourly wages of assembly worker b. straight-line depreciation on factory equipment c. overtime wages paid factory workers d. advertising costs for a furniture manufacturer
Absorption costing
What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost? a. Standard costing b. Variable costing c. Absorption costing d. Direct costing
Absorption costing only
Operating income is impacted by changes in inventory level
only variable factory overhead cost
Under variable costing, which of the following costs would be included in finished goods inventory? a. neither variable nor fixed factory overhead cost b. both variable and fixed factory overhead cost c. only variable factory overhead cost d. only fixed factory overhead cost
salary of factory supervisor
Under variable costing, which of the following costs would not be included in finished goods inventory? a. wages of machine operator b. steel costs for a machine tool manufacturer c. salary of factory supervisor d. oil costs used to lubricate machinery
only absorption costing
Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies? a. only variable costing b. only absorption costing c. both variable and absorption costing d. neither variable nor absorption costing
$22,800
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $ 80,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 40,000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 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. $24,300 b. $28,200 c. $22,800 d. $34,000
Both absorption and variable costing
May be used in a manufacturing company.
All of the above are true.
Under the variable costing method variable manufacturing costs are easier to identify and control because: a. variable and fixed costs are reported separately. b. variable costs can be controlled by the operating management. c. fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management. d. All of the above are true.
$38,000
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $ 80,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 40,000 $380,000 Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 90,000 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? a. $38,000 b. $40,500 c. $34,000 d. $47,000
$5,625
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (2,500 units): Direct materials $42,500 Direct labor 85,000 Variable factory overhead 47,500 Fixed factory overhead 12,500 $187,500 Operating expenses: Variable operating expenses $15,000 Fixed operating expenses 4,500 19,500 If 75 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. $5,625 b. $5,250 c. $5,760 d. $6,210
direct costing
Another name for variable costing is: a. indirect costing b. process costing c. direct costing d. differential costing
controllable costs.
Costs that can be influenced by management at a specific level of management are called: a. direct costs. b. indirect costs. c. noncontrollable costs. d. controllable costs.
direct materials
For a supervisor of a manufacturing department, which of the following costs are controllable? a. direct materials b. insurance on factory building c. depreciation of factory building d. rent on factory building
Absorption costing only
Includes gross profit on the income statement.
Absorption costing onlyterm-0
Required by generally accepted accounting principles.
Net income will be the same under both variable and absorption costing.
S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of a manufactured product remained unchanged. The manufacturing costs were as follows: Variable Fixed Unit manufacturing costs of the period $11.00 $7.00 Unit operating expenses of the period 3.00 2.50 Which of the following statements is true? a. Net income will be the same under both variable and absorption costing. b. Net income under variable costing will be $45,000 less than net income under absorption costing c. Net income under absorption costing will be $40,000 more than under variable costing. d. The difference in net income cannot be determined.
are less than units sold
The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured: a. exceed units sold b. equal units sold c. are less than units sold d. are equal to or greater than units sold
$50,000 decrease
The level of inventory of a manufactured product has increased by 5,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 What would be the effect on income from operations if variable costing is used rather than absorption costing? a. $50,000 decrease b. $50,000 increase c. $65,000 increase d. $65,000 decrease
$42,000 increase
The level of inventory of a manufactured product has increased by 7,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $12.00 $6.00 Unit operating expenses of the period 4.00 1.50 What would be the effect on income from operations if absorption costing is used rather than variable costing? a. $42,000 decrease b. $42,000 increase c. $52,500 increase d. $52,500 decrease
Variable costing only
Treats fixed manufacturing cost as a period cost.
Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs.
Which of the following statements is correct using the direct costing concept? a. All manufacturing costs are included in the calculation of cost of goods manufactured. b. Only fixed costs are included in the calculation of cost of goods manufactured while variable costs are considered period costs. c. Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs. d. All manufacturing costs are considered period costs.
depreciation expense on factory building
Which of the following would be included in the cost of a product manufactured according to absorption costing? a. advertising expense b. sales salaries c. depreciation expense on factory building d. office supplies costs
direct materials
Which of the following would be included in the cost of a product manufactured according to variable costing? a. sales commissions b. property taxes on factory buildings c. interest expense d. direct materials
Both absorption and variable costing
Treats fixed selling cost as a period cost
by using the absorption costing method, income could appear to be higher by producing more inventory.
Accountants prefer the variable costing method over absorption costing method for evaluating the performance of a company because a. by using the absorption costing method, income could appear to be higher by producing more inventory. b. by using the absorption method, more sales will be generated. c. by using the variable costing method, the cost of goods sold will be higher as more units are manufactured and sales remain the same. d. by using the variable costing method, all fixed and variable costs are included in the unit cost of the product manufactured.
exceed units sold
The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured: a. exceed units sold b. equal units sold c. are less than units sold d. are equal to or greater than units sold
equal units sold
The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured: a. exceed units sold b. equal units sold c. are less than units sold d. are equal to or greater than units sold
contribution margin divided by sales
The contribution margin ratio is computed as: a. sales divided by contribution margin b. contribution margin divided by sales c. contribution margin divided by cost of sales d. contribution margin divided by variable cost of sales
$80,000 increase
The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 What would be the effect on income from operations if absorption costing is used rather than variable costing? a. $80,000 decrease b. $80,000 increase c. $104,000 increase d. $104,000 decrease
sales mix
The relative distribution of sales among various products sold is referred to as the: a. by-product mix b. joint product mix c. profit mix d. sales mix
Variable costing
What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost? a. Absorption costing b. Differential costing c. Standard costing d. Variable costing
Variable costing is effective when determining short run decisions, but absorption costing is generally used for long-term pricing policies.
Which of the following is not true when determining the selling price for a product? a. Absorption costing should be used to determine routine pricing which include both fixed and variable costs. b. As long as the selling price is set above the variable costs, the company will make a profit. c. Variable costing is effective when determining short run decisions, but absorption costing is generally used for long-term pricing policies. d. Both variable and absorption pricing plans should be considered, to include several pricing alternatives.
$56,000
A business operated at 100% of capacity during its first month, with the following results: Sales (160 units) $160,000 Production costs (200 units): Direct materials $100,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 4,000 134,000 Operating expenses: Variable operating expenses $ 12,000 Fixed operating expenses 2,000 14,000 What is the amount of the manufacturing margin that would be reported on the variable costing income statement? a. $30,000 b. $38,000 c. $56,000 d. $44,000
$140,000
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $140,000 Direct labor 40,000 Variable factory overhead 20,000 Fixed factory overhead 4,000 $204,000 Operating expenses: Variable operating expenses $ 34,000 Fixed operating expenses 2,000 36,000 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? a. $104,000 b. $106,000 c. $140,000 d. $114,800
$100,000
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $140,000 Direct labor 40,000 Variable factory overhead 20,000 Fixed factory overhead 4,000 $204,000 Operating expenses: Variable operating expenses $ 34,000 Fixed operating expenses 2,000 36,000 If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement? a. $100,800 b. $100,000 c. $114,800 d. $140,000
$36,000
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $170,000 Direct labor 360,000 Variable factory overhead 190,000 Fixed factory overhead 50,000 $770,000 Operating expenses: Variable operating expenses $ 60,000 Fixed operating expenses 18,000 78,000 If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet? a. $41,500 b. $36,000 c. $42,800 d. $38,500
$52,500
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units): Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses: Variable operating expenses $130,000 Fixed operating expenses 50,000 180,000 If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet? a. $62,500 b. $73,500 c. $60,000 d. $52,500
$56,000
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units): Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses: Variable operating expenses $130,000 Fixed operating expenses 50,000 180,000 If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet? a. $64,000 b. $56,000 c. $66,400 d. $78,400
$53,000
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 2,000 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1,000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement? a. $51,400 b. $52,000 c. $54,000 d. $53,000
not reported
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 2,000 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1,000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the manufacturing margin that would be reported on the absorption costing income statement? a. $50,000 b. $54,000 c. not reported d. $70,000
$50,400
A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (5,000 units): Direct materials $70,000 Direct labor 20,000 Variable factory overhead 10,000 Fixed factory overhead 2,000 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1,000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement? a. $50,400 b. $70,000 c. $52,000 d. $68,400
contribution margin
In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields: a. differential margin b. contribution margin c. gross profit d. marginal expenses
the short run
It would be acceptable to have the selling price of a product just above the variable costs and expenses of making and selling it in: a. the long run b. the short run c. both the short run and long run d. monopoly situations
$80,000 decrease
The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 What would be the effect on income from operations if variable costing is used rather than absorption costing? a. $80,000 decrease b. $80,000 increase c. $104,000 decrease d. $104,000 increase