This document contains multiple choice questions and exercises related to absorption costing and variable costing. It provides unit cost data for various companies and asks the reader to calculate net income, inventory amounts, and other financial figures under both absorption and variable costing methods. It also contains questions about the differences between absorption and variable costing.
This document contains multiple choice questions and exercises related to absorption costing and variable costing. It provides unit cost data for various companies and asks the reader to calculate net income, inventory amounts, and other financial figures under both absorption and variable costing methods. It also contains questions about the differences between absorption and variable costing.
This document contains multiple choice questions and exercises related to absorption costing and variable costing. It provides unit cost data for various companies and asks the reader to calculate net income, inventory amounts, and other financial figures under both absorption and variable costing methods. It also contains questions about the differences between absorption and variable costing.
Chapter 17: Absorption, Variable, and Throughput Costing
MULTIPLE CHOICE QUESTIONS
1. Lone Star has computed the following unit costs for the year just ended: Direct material used $12 Direct labor 18 ariable manufacturing o!erhead 2" #i$ed manufacturing o!erhead 2% ariable selling and administrati!e cost 1& #i$ed selling and administrati!e cost 1' (nder !ariable costing) each unit of the company*s in!entory would be carried at: +. $,". -. $"". .. $/". D. $80. 1. some other amount. 2. 2erber .orporation has computed the following unit costs for the year just ended: Direct material used $1" Direct labor 2, ariable manufacturing o!erhead 2& #i$ed manufacturing o!erhead ,& ariable selling and administrati!e cost 12 #i$ed selling and administrati!e cost 1% (nder absorption costing) each unit of the company*s in!entory would be carried at: +. $"8. -. $88. .. $1&&. D. $11%. 1. some other amount. ,. 3c+fee) which began business at the start of the current year) had the following data: 4lanned and actual production: 0&)&&& units Sales: ,')&&& units at $1" per unit 4roduction costs: ariable: $0 per unit #i$ed: $2/&)&&& Selling and administrati!e costs: ariable: $1 per unit #i$ed: $,2)&&& 5he amount of contribution margin the company would disclose on an absorption6costing income statement is: +. $&. -. $10')&&&. 1 .. $1//)"&&. D. $,'&)&&&. 1. none of the abo!e. (se the following to answer 7uestions 06": #ran8 began business at the start of this year and had the following costs: !ariable manufacturing cost per unit) $%9 fi$ed manufacturing costs) $/&)&&&9 !ariable selling and administrati!e costs per unit) $29 and fi$ed selling and administrati!e costs) $22&)&&&. 5he company sells its units for $0" each. +dditional data follow. 4lanned production in units 1&)&&& +ctual production in units 1&)&&& :umber of units sold 8)"&& 5here were no !ariances. 0. 5he net income ;loss< under absorption costing is: +. $;')"&&<. -. $%)&&&. .. $1")&&&. D. $18)&&&. 1. some other amount. ". 5he net income ;loss< under !ariable costing is: +. $;')"&&<. -. $%)&&&. .. $1")&&&. D. $18)&&&. 1. some other amount. /. 3one$ reported $/")&&& of net income for the year by using absorption costing. 5he company had no beginning in!entory) planned and actual production of 2&)&&& units) and sales of 18)&&& units. Standard !ariable manufacturing costs were $2& per unit) and total budgeted fi$ed manufacturing o!erhead was $1&&)&&&. =f there were no !ariances) net income under !ariable costing would be: +. $1")&&&. -. $"")&&&. .. $/")&&&. D. $'")&&&. 1. $11")&&&. '. .anyon reported $1&/)&&& of net income for the year by using !ariable costing. 5he company had no beginning in!entory) planned and actual production of "&)&&& units) and sales of 0')&&& units. Standard !ariable manufacturing costs were $1" per unit) and total budgeted fi$ed manufacturing o!erhead was $1"&)&&&. =f there were no !ariances) net income under absorption costing would be: +. $"2)&&&. -. $%')&&&. .. $1&/)&&&. D. $11")&&&. 2 1. $1/&)&&&. EXERCISE (Miscellaneous Calculations: Variable and Absorption Costing) 1. =nformation ta>en from ?ersey .orporation*s 3ay accounting records follows. Direct materials used $1"&)&&& Direct labor /&)&&& ariable manufacturing o!erhead ,&)&&& #i$ed manufacturing o!erhead 8&)&&& ariable selling and administrati!e costs "1)&&& #i$ed selling and administrati!e costs 2&)&&& Sales re!enues "'")&&& @e7uired: +. +ssuming the use of !ariable costing) compute the in!entoriable costs for the month. -. .ompute the month*s in!entoriable costs by using absorption costing. .. +ssume that anticipated and actual production totaled 2&)&&& units) and that 1')&&& units were sold during 3ay. Determine the amount of fi$ed manufacturing o!erhead and fi$ed selling and administrati!e costs that would be e$pensed for the month under ;1< !ariable costing and ;2< absorption costing. D. +ssume the same data as in re7uirement A..A .ompute the contribution margin that would be reported on a !ariable6costing income statement. (Absorption- and Variable-Costing Income Calculations) 2. 5he following data relate to enture .ompany) a new corporation) during a period when the firm produced and sold 1&&)&&& units and %&)&&& units) respecti!ely: Direct materials used $0&&)&&& Direct labor 2&&)&&& #i$ed manufacturing o!erhead 2"&)&&& ariable manufacturing o!erhead 12&)&&& #i$ed selling and administrati!e e$penses ,&&)&&& ariable selling and administrati!e e$penses 0")&&& 5he company met its original planned production target of 1&&)&&& units. 5here were no !ariances during the period) and the firm*s selling price is $1" per unit. @e7uired: +. Bhat is the cost of enture*s end6of6period finished6goods in!entory under the !ariable6costing , methodC -. .alculate the company*s !ariable6costing net income. .. .alculate the company*s absorption6costing net income. ;Conersion o! Absorption-Cost "ata to Variable-Cost "ata# $or%ing &ac%'ards< ,. Dawthorne) =nc.) began business at the start of the current year and maintains its accounting records on an absorption6cost basis. 5he following selected information appeared on the company*s income statement and end6of6year balance sheet: =ncome6statement data: Sales re!enues ;,")&&& units $ $22< $''&)&&& 2ross margin 21&)&&& 5otal sales and administrati!e e$penses 1/&)&&& -alance6sheet data: 1nding finished6goods in!entory ;12)&&& units< 1%2)&&& Dawthorne achie!ed its planned production le!el for the year. 5he company*s fi$ed manufacturing o!erhead totaled $101)&&&) and the firm paid a 1&E commission based on gross sales dollars to its sales force. @e7uired: +. Dow many units did Dawthorne plan to produce during the year. -. Dow much fi$ed manufacturing o!erhead did the company apply to each unit manufacturedC .. .ompute Dawthorne*s cost of goods sold. D. Dow much !ariable cost did the company attach to each unit manufacturedC 1. +ssuming the use of !ariable costing) compute ;1< the cost of ending finished6goods in!entory) ;2< the contribution margin for the year) and ;,< net income. 0 ((econciliation o! Absorption- and Variable-Costing Income) 0. Southfor> .ompany has per6unit fi$ed and !ariable manufacturing costs of $0& and $1") respecti!ely. ariable selling and administrati!e costs are $% per unit. +ssume that during the past two years) Southfor> reported the following income) sales) and production information: 2&$1: ariable6costing income) $11&)&&&9 sales) /)&&& units9 production) /)&&& units 2&$2: ariable6costing income) $%0)&&&9 sales) ')"&& units9 production) ')1&& units @e7uired: +. #rom a product6costing perspecti!e) what is the basic difference between absorption costing and !ariable costingC -. .ompute Southfor>*s absorption6costing income in 2&$1. .. .ompute Southfor>*s absorption6costing income in 2&$2. "
3. If the critical path is longer than 60 days, what is the least amount that Dr. Watage can spend and still achieve the schedule objective? How can he prove to the Pathminder Fund that this is the minimum cost alternative?