CHAPTER13:STANDARDCOSTING,VARIABLECOSTING,ANDTHROUGHPUTCOSTING

MultipleChoice
a1.WhichofthefollowingisNOTatypeofabsorptioncosting?
a.Directcosting.
b.Actualcosting.
c.Normalcosting.
d.Noneoftheabove.
b2.VariablecostingisUNACCEPTABLEfor
a.managerialaccounting.
b.financialaccounting.
c.transferpricing.
d.reportingbyproductlinesforinternalpurposes.
d3.Acriticismofvariablecostingformanagerialaccountingpurposesisthatit
a.isnotacceptableforproductlinesegmentedreporting.
b.doesnotreflectcostvolumeprofitrelationships.
c.overstatesinventories.
d.mightencouragemanagerstoemphasizetheshorttermattheexpenseofthelongterm.
c4.Normalcostingandstandardcostingdifferinthat
a.thetwosystemscanshowdifferentoverheadbudgetvariances.
b.onlynormalcostingcanbeusedwithabsorptioncosting.
c.thetwosystemsshowdifferentvolumevariancesifstandardhoursdonotequalactualhours.
d.normalcostingislessappropriateformultiproductfirms.
d5.Variablecostingandabsorptioncostingwillshowthesameincomeswhenthereareno
a.beginninginventories.
b.endinginventories.
c.variablecosts.
d.beginningandendinginventories.
c6.ABChadthesameactivityin20X3asin20X2exceptthatproductionwashigherin20X3thanin20X2.ABC
willshow
a.higherincomein20X3thanin20X2.
b.thesameincomeinbothyears.
c.thesameincomeinbothyearsundervariablecosting.
d.thesameincomeinbothyearsunderabsorptioncosting.
b7.Theuseofvariablecostingrequiresknowing
a.thecontributionmarginandbreakevenpointforeachproduct.
b.thevariableandfixedcomponentsofproductioncost.
c.controllableandnoncontrollablecomponentsofallcosts.
d.thenumberofunitsofeachproductproducedduringtheperiod.
d8.WhichmeasureofactivityislikelytogivetheLOWESTstandardfixedcostperunit?
a.Actualactivity.
b.Normalcapacity.
c.Budgetedactivity.
d.Practicalcapacity.
c9.WhichitemisNOTusedtocomputethefixedoverheadvolumevariance?
a.Standardfixedcostperunit.
b.Budgetedfixedoverhead.
c.Actualfixedoverhead.
d.Actualquantityproduced.
b10.WhichvarianceisLEASTrelevantforcontrolpurposes?
a.Materialusevariance.
b.Fixedoverheadvolumevariance.
c.Fixedoverheadbudgetvariance.
d.Laborefficiencyvariance.
a11.Acompanythatsetsastandardfixedcostbasedonpracticalcapacity
a.shouldexpectunfavorablevolumevariances.
b.willsetitssellingpricestoolow.
c.hasahighercostperunitthanacompanyusingnormalactivitytosetthestandard.
d.usuallyoverappliesitsfixedcosts.
a12.Apredeterminedoverheadrateforfixedcostsisunlikeastandardfixedcostperunitinthata
predeterminedoverheadrateis
a.basedonaninputfactorlikedirectlaborhoursandastandardcostperunitisbasedonaunitof
output.
b.basedonpracticalcapacityandastandardfixedcostcanbebasedonanylevelofactivity.
c.usedwithvariablecostingwhileastandardfixedcostisusedwithabsorptioncosting.
d.likelytobehigherthanastandardfixedcostperunit.
b13.ABChad$400,000budgetedfixedoverheadcostsandbaseditsstandardonnormalactivityof40,000units.
Actualfixedoverheadcostswere$430,000,actualproductionwas36,000units,andsaleswere30,000
units.Thevolumevariancewas
a.$30,000.
b.$40,000.
c.$70,000.
d.$77,777.
a14.AdvocatesofvariablecostingforinternalreportingpurposesdoNOTrelyonwhichofthefollowing
points?

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a.Thematchingconcept.
b.Pricevolumerelationships.
c.Absorptioncostingdoesnotincludesellingandadministrativeexpensesaspartofinventoriablecost.
d.Productioninfluencesincomeunderabsorptioncosting.
d15.CalculatingincomeundervariablecostingdoesNOTrequireknowing
a.unitsales.
b.unitvariablemanufacturingcosts.
c.sellingprice.
d.unitproduction.
a16.Inventoriablecostsunderabsorptioncostinginclude
a.bothfixedandvariableproductioncosts.
b.onlyvariableproductioncosts.
c.allproductioncostsplusvariablesellingandadministrativecosts.
d.allproductioncostsplusallsellingandadministrativecosts.
b17.Inventoriablecostsundervariablecostinginclude
a.fixedandvariableproductioncosts.
b.variableproductioncosts.
c.allproductioncostsplusvariablesellingandadministrativecosts.
d.allproductioncostsplusallsellingandadministrativecosts.
d18.Absorptioncostingandvariablecostingdifferinthat
a.incomeislowerundervariablecosting.
b.variablecostingtreatssellingcostsasperiodcosts.
c.variablecostingtreatsallvariablecostsasproductcosts.
d.inventorycostishigherunderabsorptioncosting.
c19.Absorptioncostingdiffersfromvariablecostinginthat
a.standardscanbeusedwithabsorptioncosting,butnotwithvariablecosting.
b.absorptioncostinginventoriesaremorecorrectlyvalued.
c.productioninfluencesincomeunderabsorptioncosting,butnotundervariablecosting.
d.companiesusingabsorptioncostinghavelowerfixedcosts.
a20.Whichmethodgivesthelowestinventorycostperunit?
a.Variablecosting.
b.Absorptioncostingusingnormalactivitytosetthestandardfixedcost.
c.Absorptioncostingusingpracticalcapacitytosetthestandardfixedcost.
d.Actualabsorptioncosting.
b21.Whichcostsaretreateddifferentlyunderabsorptioncostingandvariablecosting?
a.Variablemanufacturingcosts.
b.Fixedmanufacturingcosts.
c.Variablesellingandadministrativeexpenses.
d.Fixedsellingandadministrativeexpenses.
a22.ABCCompanyhad15,000unitsinendinginventory.Thetotalcostofthoseunitsundervariablecostingis
a.lessthanitisunderabsorptioncosting.
b.thesameasitisunderabsorptioncosting.
c.morethanitisunderabsorptioncosting.
d.anyoftheabove.
b23.YorkCompanyhad$200,000incomeusingabsorptioncosting.Yorkhasnovariablemanufacturingcosts.
Beginninginventorywas$15,000andendinginventorywas$22,000.Incomeundervariablecostingwould
havebeen
a.$178,000.
b.$193,000.
c.$200,000.
d.$207,000.
c24.Anunfavorablevolumevariancemeansthat
a.costcontrolwasprobablypoor.
b.absorptioncostingincomeislowerthanvariablecostingincome.
c.actualoutputwaslessthanthelevelusedtosetthestandardfixedcost.
d.actualoutputwasmorethanthelevelusedtosetthestandardfixedcost.
d25.WhichvarianceCANNOTariseundervariablecosting?
a.variableoverheadbudgetvariance.
b.variableoverheadefficiencyvariance.
c.fixedoverheadbudgetvariance.
d.fixedoverheadvolumevariance.
a26.Standardcostingdiffersfromnormalcostinginthetreatmentof
a.materials,directlabor,andoverhead.
b.materialsanddirectlabor.
c.directlaborandoverhead.
d.overhead.
d27.Normalcostingdiffersfromactualcostingintreating
a.materials,directlabor,andoverhead.
b.materialsanddirectlabor.
c.directlaborandoverhead.
d.overhead.
c28.Ascomparedtonormalcosting,standardcostingcanyield
a.differentvolumevariancesandbudgetvariances.
b.differentbudgetvariances.

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c.differentvolumevariances.
d.noneoftheabove.
c29.Undervariablecostingtherecanbeno
a.fixedoverheadvariances.
b.fixedoverheadbudgetvariance.
c.fixedoverheadvolumevariance.
d.nofixedoverhead.
c30.ABChadthesameactivityin20X4asin20X3exceptthatproductionwaslowerin20X4thanin20X3.ABC
willshow
a.lowerincomein20X4thanin20X3.
b.thesameincomeinbothyears.
c.thesameincomeinbothyearsundervariablecosting.
d.thesameincomeinbothyearsunderabsorptioncosting.
a31.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Endinginventoryunder
variablecostingwouldbe
a.$20,000.
b.$30,000.
c.$35,000.
d.cannotbedeterminedwithoutfurtherinformation.
c32.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Endinginventoryunder
absorptioncostingwouldbe
a.$20,000.
b.$30,000.
c.$35,000.
d.cannotbedeterminedwithoutfurtherinformation.
a33.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thevolumevarianceunder
variablecostingwouldbe
a.$0.
b.$20,000.
c.$30,000.
d.someothernumber.
c34.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thevolumevarianceunder
absorptioncostingwouldbe
a.$0.
b.$20,000.
c.$30,000.
d.someothernumber.
b35.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thestandardcostof
goodssoldundervariablecostingwouldbe
a.$400,000.
b.$420,000.
c.$735,000.
d.someothernumber.
c36.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thestandardcostof
goodssoldunderabsorptioncostingwouldbe
a.$400,000.
b.$420,000.
c.$735,000.
d.someothernumber.
c37.AlphaCompanyhasastandardfixedcostof$10perunit.Atanactualproductionof16,000unitsan
unfavorablevolumevarianceof$20,000resulted.Whatweretotalbudgetedfixedcosts?
a.$140,000
b.$160,000
c.$180,000
d.Cannotbedeterminedwithoutfurtherinformation.
a38.

BetaCompanyhasastandardfixedcostof$10perunitusinganormalcapacityof11,000units.An
unfavorablevolumevarianceof$12,000resulted.Whatwasthevolumeproduced?
a.9,800
b.11,000
c.12,200
d.Cannotbedeterminedwithoutfurtherinformation.

a39.

GammaCorporationhastotalbudgetedfixedcostsof$150,000.Actualproductionwas8,000units;normal
capacityis7,500units.Whatwasthevolumevariance?
a.$10,000favorable
b.$15,000favorable

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c.$15,000unfavorable
d.$10,000unfavorable
b40.

EasternCo.hastotalbudgetedfixedcostsof$150,000.Actualproductionof39,000unitsresultedina
$6,000favorablevolumevariance.Whatnormalcapacitywasusedtodeterminethefixedoverheadrate?
a.33,000
b.37,500
c.40,560
d.Cannotbedeterminedwithoutfurtherinformation.

a41.

WesternCompanyhasastandardfixedcostof$8perunit.Atanactualproductionof8,000unitsa
favorablevolumevarianceof$12,000resulted.Whatweretotalbudgetedfixedcosts?
a.$52,000
b.$64,000
c.$76,000
d.Cannotbedeterminedwithoutfurtherinformation.

d42.

MononaCorporationhastotalbudgetedfixedcostsof$64,000.Actualproductionwas15,000units;normal
capacityis16,000units.Whatwasthevolumevariance?
a.$4,000favorable
b.$4,267favorable
c.$4,267unfavorable
d.$4,000unfavorable

b43.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Endinginventoryundervariablecostingwouldbe
a.$10,000.
b.$13,000.
c.$23,000.
d.cannotbedeterminedwithoutfurtherinformation.
c44.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Endinginventoryunderabsorptioncostingwouldbe
a.$10,000.
b.$13,000.
c.$23,000.
d.cannotbedeterminedwithoutfurtherinformation.
d45.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thevolumevarianceundervariablecostingwouldbe
a.$10,000.
b.$20,000.
c.$30,000.
d.someothernumber.
c46.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thevolumevarianceunderabsorptioncostingwouldbe
a.$10,000.
b.$20,000.
c.$30,000.
d.someothernumber.
b47.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thestandardcostofgoodssoldundervariablecostingwouldbe
a.$230,000.
b.$299,000.
c.$506,000.
d.$529,000.
c48.

SigmaCompanyhasastandardfixedcostof$18perunitusinganormalcapacityof9,000units.A
favorablevolumevarianceof$18,000resulted.Whatwasthevolumeproduced?
a.8,000
b.9,000
c.10,000
d.Cannotbedeterminedwithoutfurtherinformation.

c49.

WesternCo.hastotalbudgetedfixedcostsof$72,000.Actualproductionof5,500unitsresultedina
$6,000unfavorablevolumevariance.Whatnormalcapacitywasusedtodeterminethefixedoverheadrate?
a.5,000
b.5,500
c.6,000
d.Cannotbedeterminedwithoutfurtherinformation.

d50.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thestandardcostofgoodssoldunderabsorptioncostingwouldbe
a.$230,000.
b.$299,000.

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c.$506,000.
d.$529,000.
TrueFalse
F1.Absorptioncostingincomesarealwayshigherthanvariablecostingincomes.
F2.Incomeunderstandardvariablecostingisnotinfluencedbythetotalamountoffixedmanufacturingcosts.
T3.Amultiproductcompanyusingstandardabsorptioncostingcalculatesstandardfixedcostsforeachproduct
usingastandardfixedoverheadratebasedonaninputfactorsuchasdirectlaborhours.
T4.Amajordifferencebetweenstandardcostingandnormalcostingisthatoneusesactualhourstoapply
overheadandtheotherusesstandardhours.
T5.Proponentsofvariablecostingforexternalreportingarguethatwhilefixedproductioncostsbenefit
productionasawhole,theydonotbenefitanyparticularunitofproduct.
T6.Acompanyusingabsorptioncostingcanincreaseitsincomebyincreasingproductionwithoutincreasing
sales.
F7.Acompanyusingvariablecostingcanincreaseitsincomebyincreasingproductionwithoutincreasing
sales.
F8.Variablecostingmustbeusedforinternalreporting.
F9.AccordingtoGAAP,absorptioncostingmustbeusedforinternalreporting.
T10.AccordingtoGAAP,absorptioncostingmustbeusedforexternalfinancialreporting.
Problems
1.WhitehallCompanysellsasingleproductfor$25.Ithadnobeginninginventories.Operatingdatafollow.

Sales,27,000units$675,000
Normalcapacity30,000units
Productioncosts:
Variableperunit$13
Fixedproduction$150,000
Sellingandadministrativeexpenses:
Variableperunitsold$2
Fixedselling$20,000
Numberofunitsproduced32,500units
Assumetheactualcostswereasbudgeted.

a.
Findcontributionmarginperunit.
b.

Computetheendinginventoryunderstandardvariablecosting.

c.
Computetheincomeunderstandardvariablecosting.

Assumestandardabsorptioncostingusingnormalcapacityasthebasisforcomputingthestandardfixedcost
perunit.Compute
d.

Standardgrossprofitperunit.

e.

Endinginventory.

f.

Volumevariance.

g.

Income.

SOLUTION:
a.

b.

$10($25$13$2)

c.

$100,000[(27,000x$10)($150,000+$20,000)]

d.

$7[$25$13($150,000/30,000)]

e.

$99,000[5,500x($13+$5)]

f.

$12,500F[(32,50030,000)x$5standardfixedcostperunit]

g.

$127,500[(27,000x$7)+$12,500(27,000x$2)$20,000]

$71,500[$13xendinginventoryof5,500units(32,50027,000)]

2.LundCompanysellsasingleproductfor$25.Ithadnobeginninginventories.Operatingdatafollow.

Sales,55,000units$1,375,000
Normalcapacity60,000units
Productioncosts:
Variableperunit$13
Fixedproduction$300,000
Sellingandadministrativeexpenses:
Variableperunitsold$2

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Fixedselling$40,000
Numberofunitsproduced66,000units
Assumetheactualcostswereasbudgeted.
a.Computeincomeunderstandardvariablecosting.
b.Computeincomeunderstandardabsorptioncosting.
SOLUTION:
a.

$210,000[55,000x($25132)($300,000+$40,000)]

b. $265,000{$1,375,00055,000x[$13+($300,000/60,000)]55,000x$2
$40,000+$30,000volumevariance}
3.MaidenRockCompanysellsasingleproductfor$25.Ithadnobeginninginventories.Operatingdatafollow.

Sales,20,000units$500,000
Normalcapacity30,000units
Productioncosts:
Variableperunit$13
Fixedproduction$150,000
Sellingandadministrativeexpenses:
Variableperunitsold$2
Fixedselling$20,000
Numberofunitsproduced32,500units
Assumetheactualcostswereasbudgeted.

a.
FindMaidenRocksincomeunderstandardvariablecosting.
b.

FindMaidenRocksincomeunderstandardabsorptioncosting.

SOLUTION:
a.

$30,000[20,000x($25132)($150,000+$20,000)]

b. $92,500{$500,00020,000x[$13+[$150,000/30,000)]20,000x$2
$20,000+$12,500volumevariance}
4.

GencoInc.makesasingleproductthatsellsfor$50.Thestandardvariablemanufacturingcostis$32.50and
thestandardfixedmanufacturingcostis$7.50,basedonproducing20,000units.DuringtheyearGenco
produced22,000unitsandsold21,000units.Actualfixedmanufacturingcostswere$157,000;actualvariable
manufacturingcostswere$735,000.Sellingandadministrativeexpenses,allfixed,were$75,000.Therewere
nobeginninginventories.

a.

Prepareastandardabsorptioncostingincomestatement.

b.

Prepareastandardvariablecostingincomestatement.

SOLUTION:
a.

Sales(21,000x$50)$1,050,000
CostofGoodsSold(21,000x$40)$840,000
Variances:
VariableSpending$20,000Un
FixedSpending7,000Un
Volume(15,000)F12,000
AdjustedCostofGoodsSold852,000
GrossProfit$198,000
Selling&Administrative75,000
NetIncome$123,000

b.

Sales$1,050,000
VariableCosts(21,000x$32.50)$682,500
VariableSpendingVariance20,000Un
AdjustedVariableCostofGoodsSold702,500
ContributionMargin$347,500
FixedCosts:
Manufacturing$157,000
Selling&Administrative75,000232,000
NetIncome$115,500

5.

BrahmsCorp.hasthefollowingdata:
Normalcapacity25,000
Practicalcapacity30,000
Budgetedproduction20,000
Actualproduction22,000
Actualsales($25perunit)21,000
Standardvariableproductioncostperunit$15
Budgetedfixedproductioncosts$120,000
Therewerenovariablecostvariancesfortheyear.Fixedcostsincurredwereequaltothebudgetedamount.
Therewerenobeginninginventoriesandnosellingoradministrativeexpenses.

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a.

Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingnormalcapacity.

b.

Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingpracticalcapacity.

c.

Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingbudgetedproduction.

d.

Computethevariablecostingincome.

SOLUTION:
a.

$94,800[$525,000(21,000x$19.80)$14,400volumevariance]
Volumevariance$14,400=$120,000/25,000x22,000$120,000

b.

$94,000[$525,000(21,000x$19)$32,000volumevariance]
Volumevariance$32,000=$120,000/30,000x22,000$120,000

c.

$96,000[$525,000(21,000x$21)+$12,000volumevariance]
Volumevariance$12,000=$120,000/20,000x22,000$120,000

d.

$90,000[$525,000(21,000x$15)$120,000]

6.CumberlandCompanysellsasingleproductfor$30.Ithadnobeginninginventories.Operatingdatafollow.

Sales,12,000units$360,000
Normalcapacity20,000units
Productioncosts:
Variableperunit$15
Fixedproduction$75,000
Sellingandadministrativeexpenses:
Variableperunitsold$5
Fixedselling$25,000
Numberofunitsproduced13,000units
Assumetheactualcostswereasbudgeted.

a.
Findcontributionmarginperunit.
b.

Computetheendinginventoryunderstandardvariablecosting.

c.
Computetheincomeunderstandardvariablecosting.

Assumestandardabsorptioncostingusingnormalcapacityasthebasisforcomputingthestandardfixedcost
perunit.Compute
d.

Standardgrossprofitperunit.

e.

Endinginventory.

f.

Volumevariance.

g.

Income.

SOLUTION:
a.

b.

$10($30$15$5)

c.

$20,000[(12,000x$10)($75,000+$25,000)]

d.

$11.25[$30$15($75,000/20,000)]

e.

$18,750[1,000x($15+$3.75)]

f.

$26,250U[(20,00013,000)x$3.75standardfixedcostperunit]

g.

$23,750[(12,000x$11.25)$26,250(12,000x$5)$25,000]

$15,000[$15xendinginventoryof1,000units(13,00012,000)]

7.AcmeCompanysellsasingleproductfor$30.Ithadnobeginninginventories.Operatingdatafollow.
Sales,12,000units$360,000
Normalcapacity15,000units
Productioncosts:
Variableperunit$17
Fixedproduction$75,000
Sellingandadministrativeexpenses:
Variableperunitsold$5
Fixedselling$25,000
Numberofunitsproduced13,500units
Assumetheactualcostswereasbudgeted.
a.Computeincomeunderstandardvariablecosting.
b.Computeincomeunderstandardabsorptioncosting.

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SOLUTION:
a.

$(4,000)[(12,000x($30$17$5)($75,000+$25,000)]

b. $3,500{$360,00012,000x[$17+($75,000/15,000)]12,000x$5
$25,000$7,500volumevariance}
8.CarlsonCompanysellsasingleproductfor$30.Ithadnobeginninginventories.Operatingdatafollow.

Sales,12,500units$375,000
Normalcapacity15,000units
Productioncosts:
Variableperunit$17
Fixedproduction$75,000
Sellingandadministrativeexpenses:
Variableperunitsold$5
Fixedselling$25,000
Numberofunitsproduced13,000units
Assumetheactualcostswereasbudgeted.

a.
FindCarlsonsincomeunderstandardvariablecosting.
b.
FindCarlsonsincomeunderstandardabsorptioncosting.

SOLUTION:
a.

$0[12,500x($30$17$5)($75,000+$25,000)]

b. $2,500{$375,00012,500x[$17+($75,000/15,000)]12,500x$5
$25,000$10,000volumevariance}
9.

BachInc.makesasingleproductthatsellsfor$40.Thestandardvariablemanufacturingcostis$22andthe
standardfixedmanufacturingcostis$8,basedonproducing30,000units.DuringtheyearBachproduced
28,000unitsandsold26,000units.Actualfixedmanufacturingcostswere$235,000;actualvariable
manufacturingcostswere$595,000.Sellingandadministrativeexpenseswere$95,000.Therewerenobeginning
inventories.

a.

Prepareastandardabsorptioncostingincomestatement.

b.

Prepareastandardvariablecostingincomestatement.

SOLUTION:
a.

Sales(26,000x$40)$1,040,000
CostofGoodsSold(26,000x$30)$780,000
Variances:
VariableSpending$(21,000)F
FixedSpending(5,000)F
Volume16,000Un(10,000)
AdjustedCostofGoodsSold770,000
GrossProfit$270,000
Selling&Administrative95,000
NetIncome$175,000

b.

Sales$1,040,000
VariableCosts(26,000x$22)$572,000
VariableSpendingVariance(21,000)F
AdjustedVariableCostofGoodsSold551,000
ContributionMargin$489,000
FixedCosts:
Manufacturing235,000
Selling&Administrative95,000330,000
NetIncome$159,000

10.HaydenCorp.hasthefollowingdata:
Normalcapacity40,000
Practicalcapacity45,000
Budgetedproduction30,000
Actualproduction35,000
Actualsales($20perunit)32,000
Standardvariableproductioncostperunit$12
Budgetedfixedproductioncosts$135,000
Therewerenovariablecostvariancesfortheyear.Fixedcostsincurredwereequaltothebudgetedamount.
Therewerenobeginninginventoriesandnosellingoradministrativeexpenses.
a.

Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingnormalcapacity.

b.

Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingpracticalcapacity.

c.

Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingbudgetedproduction.

d.

Computethevariablecostingincome.

SOLUTION:

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a.

$131,125[$640,000(32,000x$15.375)$16,875volumevariance]
Volumevariance$16,875=$135,000/40,000x35,000$135,000

b.

$130,000[$640,000(32,000x$15)$30,000volumevariance]
Volumevariance$30,000=$135,000/30,000x35,000$135,000

c.

$134,500[$640,000(32,000x$16.50)+$22,500volumevariance]
Volumevariance$22,500=$135,000/30,000x35,000$135,000

d.

$121,000[$640,000(32,000x$12)$135,000]

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