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Exam 6: Variable Costing and Performance Reporting

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Question 91

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Given Advanced Company's data, compute cost per unit of finished goods under variable costing.

A) $20.00
B) $25.00
C) $21.88
D) $23.00
E) $28.50

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Question 92

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Given the following data, total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing. $\begin{array} { | l | c | } \hline \text { Direct labor } & \$ 9 \text { per unit } \\\hline \text { Direct rmaterials } & \$ 7 \text { per unit } \\\hline \text { Overhead } & \\\hline \text { Total variable overhead } & \$ 45,000 \\\hline \text { Total fixed overhead } & \$ 27,000 \\\hline & \\\hline \text { Expected urits to be produced } & 9,000 \text { units } \\\hline\end{array}$

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Question 93

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

Reported income is identical under absorption costing and variable costing when the units produced _______________ the units sold.

Chance, Inc.sold 3,000 units of its product at a price of $72 per unit.Total variable cost per unit is $51, consisting of $32 in variable production cost and $19 in variable selling and administrative cost.Compute the manufacturing margin for the company under variable costing.

Scavenger Company, a manufacturer of recycling bins, began operations on January 1 of the current year. During this time, the company produced 60,000 units and sold 55,000 units at a sales price of $15 per unit. Cost information for this year is shown in the following table: $\begin{array}{ll}\text { Production costs }\\\text { Direct materials } & \$ 2.50 \text { per unit } \\\text { Direct labor } & \$ 3.00 \text { per unit } \\\text { Variable overhead } & \$ 45,000 \text { in total } \\\text { Fixed overhead } & \$ 240,000 \text { in total } \\\text { Nonproduction costs } & \\\text { Variable selling and administrative } & \$ 10,000 \text { in total } \\\text { Fixed selling and administrative } & \$ 50,000 \text { in total }\end{array}$ -Given the Scavenger Company data, what is net income using absorption costing?

________________________ costing treats fixed overhead as a period cost.

When units produced equal units sold, reported income is identical under absorption costing and variable costing.

A traditional product costing approach is referred to as ______________.

Scavenger Company, a manufacturer of recycling bins, began operations on January 1 of the current year. During this time, the company produced 60,000 units and sold 55,000 units at a sales price of $15 per unit. Cost information for this year is shown in the following table: $\begin{array}{ll}\text { Production costs }\\\text { Direct materials } & \$ 2.50 \text { per unit } \\\text { Direct labor } & \$ 3.00 \text { per unit } \\\text { Variable overhead } & \$ 45,000 \text { in total } \\\text { Fixed overhead } & \$ 240,000 \text { in total } \\\text { Nonproduction costs } & \\\text { Variable selling and administrative } & \$ 10,000 \text { in total } \\\text { Fixed selling and administrative } & \$ 50,000 \text { in total }\end{array}$ -Given the Scavenger Company data, what is net income using variable costing?

Absorption costing is not permitted under GAAP.

Variable costing treats fixed overhead cost as a period cost.

Reporting contribution margin by market segment is useful in assessing the profitability of each segment.

Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under variable costing.

Assume a company had the following production costs: $\begin{array}{ll} \text { Direect labor } &\$ 20,000 \\ \text { Direct material } &\$ 30,000 \\ \text { Variable overhead } &\$ 40,000 \\ \text { Fixed overhead } &\$ 50,000\end{array}$ Under absorption costing, the total production cost per unit when 4,000 units are produced would be $22.50.

Planet Corporation sold 21,000 units of its product at a price of $250 per unit.Total variable cost per unit is $187, consisting of $104 in variable production cost and $83 in variable selling and administrative cost.Compute the manufacturing margin for the company under variable costing.

_______________________ costing is the only acceptable basis for both external reporting and tax reporting.