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Exam 21: Variable Costing for Management Analysis

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Question 21

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Under absorption costing, which of the following costs would not be included in finished goods inventory?

A) hourly wages of assembly worker
B) straight-line depreciation on factory equipment
C) overtime wages paid to factory workers
D) the salaries for salespeople

E) A) and B)
F) A) and C)

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Question 22

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The level of inventory of a manufactured product has increased by 7,000 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

A) $42,000 decrease
B) $42,000 increase
C) $52,500 increase
D) $52,500 decrease

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

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Question 23

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A business operated at 100% of capacity during its first month and incurred the following costs: If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, the amount of operating income reported on the variable costing income statement would be

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

Match each of the following descriptions with the appropriate costing concept (a-c). -Treats fixed manufacturing cost as a period cost A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

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

It would be acceptable to have the selling price of a product just above the variable costs and expenses of making and selling it in

The relative distribution of sales among the various products sold is referred to as the

Match each of the following descriptions with the appropriate costing concept (a-c). -Treats fixed selling cost as a period cost A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

For a period during which the quantity of inventory at the end is smaller than that at the beginning, operating income reported under variable costing will be smaller than operating income reported under absorption costing.

Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption costing concept.

Under variable costing, which of the following costs would not be included in finished goods inventory?

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, the amount of inventory that would be reported on the absorption costing balance sheet is

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,500 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is

Which of the following is not true when determining the selling price for a product?

In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the changes in various activities.

A business operated at 100% of capacity during its first month, with the following results: ​ -The amount of contribution margin that would be reported on the variable costing income statement is

For a period during which the quantity of product manufactured equals the quantity sold, operating income reported under absorption costing will equal the operating income reported under variable costing.

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.

In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields