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Exam 8: Absorption and Variable Costing, and Inventory Management

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Question 51

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Steele Corporation has the following information for January, February, and March: Production costs per unit (based on 10,000 units) are as follows: There were no beginning inventories for January, and all units were sold for $50. Costs are stable over the three months. -Refer to Figure 8-8. What is the February ending inventory for Steele Corporation using the absorption costing method?

A) $39,000
B) $45,000
C) $135,000
D) $300,000

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Question 52

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Bailey Company incurred the following costs in manufacturing desk calculators: During the period, the company produced and sold 2,000 units. -Refer to Figure 8-6. What is the inventory cost per unit using absorption costing?

A) $104
B) $77
C) $84
D) $32

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Question 53

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Figure 8-3 Martin Company uses 625 units of a part each year. The cost of placing one order is $8; the cost of carrying one unit in inventory for a year is $4. -Refer to Figure 8-3. What is the EOQ for Martin?

Steele Corporation has the following information for January, February, and March: Production costs per unit (based on 10,000 units) are as follows: There were no beginning inventories for January, and all units were sold for $50. Costs are stable over the three months. -Refer to Figure 8-8. What is the March ending inventory for Steele Corporation using the variable costing method?

Last year, Fabre Company produced 20,000 units and sold 18,000 units at a price of $12. Costs for last year were as follows: Fixed factory overhead is applied based on expected production. Last year, Fabre expected to produce 20,000 units. -Refer to Figure 8-1. What is operating income for last year under variable costing?

Match the type of income statement to the costs it includes. -Administrative expense

Loring Company had the following data for the month: Fixed overhead is $4,000 per month; it is applied to production based on normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14. Selling and administrative expense for the month, all fixed, totaled $3,600. -Refer to Figure 8-2. What is the unit product cost under variable costing?

Consider the following portion of a segmented income statement for the year just ended. Assume fixed expenses of Division X include $30,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments nor reduce the common expenses. What is X's divisional segment margin?

______________ is computed by multiplying the lead time by the difference between the maximum rate of usage and the average rate of usage.

Just-in-time

Last year, Baker Company produced 30,000 units and sold 28,000 units. Beginning inventory was zero. During the period, the following costs were incurred: Required: Compute the dollar amount of ending inventory using:

Inventory taxes, obsolescence, and insurance are examples of _______________.

Ramon Company reported the following units of production and sales for June and July: Income under absorption costing for June was $40,000; income under variable costing for July was $50,000. Fixed costs were $600,000 for each month. -Refer to Figure 8-7. How much was income for July using absorption costing?

Total inventory-related cost consists of ordering cost and carrying cost.

The economic order quantity (EOQ) is the quantity that

When the economic order quantity (EOQ) model is applied to units produced within the company, ordering costs become

Tyler Company has the following information pertaining to its two product lines for last year: Common expenses are $105,000 for the year. -Refer to Figure 8-11. What is the segment margin for Product B?

Lost sales and costs of expediting shipments of goods are examples of _______________.

Rudd Company uses 40,000 micro-chips each year in its production of digital cameras. The cost of placing an order is $75. The cost of holding one unit of inventory for one year is $8. Currently Rudd places 20 orders of 2,000 units per order. Required: A. Compute the annual ordering cost. B. Compute the annual carrying cost. C. Compute the total cost of Rudd's current inventory policy. D. Compute the economic order quantity. E. Compute the order cost and the carrying cost for the EOQ. F. How much money does using the EOQ policy save the company over the policy of purchasing 2,000 micro-chips per order?

Ellie Manufacturing Company produces three products: A, B, and C. The income statement for most recent year is as follows: The sales, contribution margin ratios, and direct fixed expenses for the three types of products are as follows: Required: Prepare income statements segmented by products. Include a column for the entire firm in the statement.