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Exam 21: Variable Costing for Management Analysis

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Question 1

Multiple Choice

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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.

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C

Question 2

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Which of the following terms 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

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Question 3

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For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: The effect on operating income if absorption costing is used rather than variable costing would be a

If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is the manufacturing cost per unit if: a. 20,000 units are manufactured and the company uses the variable costing concept? b. 25,000 units are manufactured and the company uses the variable costing concept? c. 20,000 units are manufactured and the company uses the absorption costing concept? d. 25,000 units are manufactured and the company uses the absorption costing concept?

Under variable costing, which of the following costs would be included in finished goods inventory?

Under absorption costing, increases or decreases in operating income due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

The amount of income under absorption costing will be more than the amount of income under variable costing when units manufactured

Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable factory overhead.

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured

The absorption costing income statement does not distinguish between variable and fixed costs.

In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of contribution margin that would be reported on the variable costing income statement is

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

On the absorption costing income statement, deduction of the cost of goods sold from sales yields contribution margin.

S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the manufactured product remained unchanged. The manufacturing costs were as follows: Which of the following statements is true?

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: The effect on operating income if absorption costing is used rather than variable costing would be a(n)

Match each of the following descriptions with the appropriate costing concept (a-c). -Required by generally accepted accounting principles A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

Under which inventory costing method could increases or decreases in operating income be misinterpreted to be the result of operating efficiencies or inefficiencies?

The contribution margin ratio is computed as