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Exam 20: Variable Costing for Management Analysis

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Question 41

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

A) $80,000 decrease
B) $80,000 increase
C) $104,000 increase
D) $104,000 decrease

E) C) and D)
F) B) and D)

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Question 42

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For a period during which the quantity of inventory at the end equals the inventory at the beginning, income from operations reported under variable costing will equal income from operations reported under absorption costing.

A) True
B) False

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Question 43

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At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000 units. a) How much would absorption costing income from operations differ between a plan to produce 8,000 units and a plan to produce 10,000 units? b) How much would variable costing income from operations differ between the two production plans?

The following data are for Trendy Fashion Apparel: Determine the contribution margin for a) Skirts and b) the South Region.

The Excelsior Company has three salespersons. Average sales price per unit sold, average variable manufacturing costs per unit, and number of units sold for each salesperson are shown below. Commissions are earned according to the following schedule: Prepare a contribution by salesperson report.

Costs that can be influenced by management at a specific level of management are called:

Management may use both absorption and variable costing methods for analyzing a particular product.

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

Contribution margin reporting and analysis is appropriate only for manufacturing firms, not for service firms.

Gyro Company manufactures Products T and W and is operating at full capacity. To manufacture Product W requires three times the number of machine hours required for Product T. Market research indicates that 1,000 additional units of Product W could be sold. The contribution margin by unit of product is as follows: Calculate the increase or decrease in total contribution margin if 1,000 additional units of Product W are produced and sold.

Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.

For a period during which the quantity of product manufactured was less than the quantity sold, income from operations reported under absorption costing will be larger than income from operations reported under 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, what is the amount of the manufacturing margin that would be reported on the absorption costing income statement?

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, what would be the amount of income from operations reported on the absorption costing income statement?

For a period during which the quantity of product manufactured exceeded the quantity sold, income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

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

At EOM Inc., the beginning inventory is 20,000 units. All of the units manufactured during the period and 16,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and variable costs are $300 per unit. Determine a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and b) the difference in variable costing and absorption income from operations.

Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.

Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis report for the year ended December 31.

In variable costing, the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.