You are on page 1of 5

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.
"

You might also like