Accounting CH. 19

setting prices

1. Determine the product cost per unit using absorption costing 2. Determine the target markup on product cost per unit 3. Add the target markup to the product cost to find the target selling price

Which of the following best describes costs assigned to the product under the absorption costing method?Direct labor (DL)Direct materials (DM)Variable selling and administrative (VSA)Variable manufacturing overhead (VOH)Fixed selling and administrative (FSA)Fixed manufacturing overhead (FOH) DL, DM, VSA, and VOH. DL, DM, and VOH. DL, DM, VOH, and FOH. DL and DM. DL, DM, FSA, and FOH.

DL, DM, VOH, and FOH.

Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL)Direct materials (DM)Variable selling and administrative (VSA)Variable manufacturing overhead (VOH)Fixed selling and administrative (FSA)Fixed manufacturing overhead (FOH) DL, DM, VSA, and VOH. DL, DM, and VOH. DL, DM, VOH, and FOH. DL and DM. DL, DM, FSA, and FOH.

DL, DM, and VOH.

variable costing for services

Differences in income from absorption and variable costing don't apply (because they do not produce inventory) Variable costs change as the volume of services provided change. Fixed costs don't change as the volume of services change

variable cost of goods sold

Direct materials, direct labor, and variable overhead costs for units sold.

Differences in income from alternate methods small when

Fixed overhead is a small % of costs Inventory levels are low Inventory turnover is rapid Period of analysis is long

Which of the following is not a product cost under variable costing? Direct materials. Fixed overhead. Direct labor. Variable overhead. None of the above.

Fixed overhead.

Which of the following statements is true regarding variable costing? It is the required method for external financial reporting. It includes direct materials, direct labor, and variable overhead costs in product costs. It is not permitted to be used for managerial reporting. It treats overhead in the same manner as absorption costing. It makes it easier to manipulate earnings with changes in production levels.

It includes direct materials, direct labor, and variable overhead costs in product costs.

Income __________ when there is zero beginning inventory and all inventory units produced are sold. Will be lower under variable costing than absorption costing Will be the same under both variable and absorption costing Will be higher under variable costing than absorption costing Will be higher than gross profit under variable costing Will be lower than administrative costs under absorption costing

Will be the same under both variable and absorption costing

Which of the following costing methods charges all manufacturing costs to its products? Direct costing ABC costing Variable costing Absorption costing Period costing

absorption costing

a/v income when production is less than sales

absorption<variable

a/v income when production=sales

absorption=variable

a/v income when production is greater than sales

absorption>variable

variable costing is useful in

analyzing performance of business divisions such as sales territories and product lines

Which of the following would be reported on a variable costing income statement? Gross Profit Cost of goods available for sale Total cost of goods sold Contribution margin Work-in-process inventory

contribution margin

difference between absorption costing and variable costing

fixed overhead included in product costs for absorption costing

Absorption costing can result in overproduction (ex. Manager bonus system) because...

fixed overhead is included in ending inventory instead of being expensed as a cost of goods sold earlier

income is _____ under absorption costing and variable costing when the units produced equal the units sold.

identical

absorption costing

includes direct materials, direct labor and both variable and fixed overhead Product costs Direct materials Direct labor Variable overhead Fixed overhead

variable costing

includes direct materials, direct labor, and variable overhead Product costs Direct materials Direct labor Variable OH Period costs Fixed OH

managers should accept special orders if

special order price exceeds variable cost

Contribution Margin Ratio

the percent of sales that remains after subtracting variable expenses higher is better

Income under absorption costing and income under variable costing differ whenever

the units produced differ from units sold This is due to the different timing with which fixed overhead costs are reported in income under the two methods

two variable costing methods

variable and absorption

Which of the following statements is true? variable costing treats fixed overhead as a period cost. Absorption costing treats fixed overhead as a period cost. Absorption costing treats fixed overhead as an expense in the period it is incurred. Variable costing excludes all overhead from product costs. Managers can manipulate earnings more easily under variable costing by varying the production level.

variable costing treats fixed overhead as a period cost.