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Exam 6: Variable Costing and Analysis

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Question 91

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When the number of units sold exceeds the number of units produced, income reported under absorption costing will be lower than variable costing. Which of the following gives the best justification of the above statement?

A) Income under absorption costing is always less than income reported using variable costing, regardless of the number of units produced.
B) Income under absorption costing is always more than income reported using variable costing, regardless of the number of units produced.
C) The fixed overhead cost deferred in ending inventory is greater than the fixed overhead cost recognized from beginning inventory.
D) The fixed overhead cost deferred in ending inventory is less than the fixed overhead cost recognized from beginning inventory.

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Question 92

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Identify the treatment of each of the following costs under variable costing and absorption costing:

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Question 93

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Given the Cool Pools Company data, what is net income using variable costing?

________ is equal to Sales minus Variable manufacturing costs.

Given the following data, total product cost per unit under variable costing is $7.09.

Assume a company sells a given product for $18 per unit. Variable selling costs are $0.70 per unit and variable production costs are $5.30 per unit. If the company breaks even when selling 4,000,000 units, what are total fixed costs?

________ costing treats fixed overhead as a period cost.

Pact Company had net income of $972,000 based on variable costing. Beginning and ending inventories were 7,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was $3.61 for both the beginning and ending inventory. What is net income under absorption costing?

When there are zero units in Beginning Finished Goods Inventory and the units produced are more than the units sold, the income will be lower under variable costing than under absorption costing.

Under variable costing, product costs consist of direct labor, direct materials, and ________.

Absorption costing is useful because it reflects the full costs that sales must exceed for the company to be profitable.

A company reports the following information regarding its production cost: Required: Perform the following independent calculations. a. Compute total variable overhead cost if the production cost per unit under variable costing is $73. b. Compute total variable overhead cost if the production cost per unit under absorption costing is $73.

Under absorption costing, which of the following statements is not true?

Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table: Given this information, which of the following is true?

Gage Company reports the following information for its first year of operations: If the company's cost per unit of finished goods using variable costing is $63, what is total variable overhead?

Which of the following costing methods charges all manufacturing costs to its products?

A company normally sells a product for $20 per unit. Variable per unit costs for this product are: $2 direct materials, $4 direct labor, and $1.50 variable overhead. The company is currently operating at 70% of capacity producing 14,000 units per year. Total fixed costs are $42,000 per year. The company should not accept a special order for 2,000 units which would be sold for $10 per unit because there would be an incremental loss on the order.

Home Base, Inc. reports the following production cost information: Assume that productions costs have remained the same since the previous period and all units are sold for $137.00 per unit. a. Compute production cost per unit under variable costing. b. Compute production cost per unit under absorption costing. c. Determine net income using variable costing. d. Determine net income using absorption costing.

________ is the amount remaining from manufacturing margin after all variable selling, general and administrative expenses have been deducted.

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $250,000. The company produced 25,000 units, and sold 20,000 units, leaving 5,000 units in inventory at year-end. What is the value of ending inventory under absorption costing?