Chp-06-VARIABLE-COSTING-PRB 404412616.

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1. Good Corp. began operations on Jan. 1, 2012. Good produces a single product that sells for $12.00 per unit.
Good uses an actual (historical) cost system. The company produced 100,000 units and 90,000 units were sold in 2012.
There was no work-in-process inventory at December 31, 2012. Manufacturing costs & other expenses for 2012 were:
Fixed
Variable costs
costs
Raw materials (all variable) $4.00 per unit produced
Direct labor (all variable) $3.00 per unit produced
Variable factory overhead $2.00 per unit produced
Fixed factory overhead $100,000
Variable Selling & administrative $1.00 per unit sold
Fixed Selling & administrative $60,000
What is the operating income for 2012 using the direct costing method?
a. $300,000 b. $290,000 c. $20,000 d. $30,000 e. Other
2. Repeat preceding question. Operating income using absorption costing method is:
a. $300,000 b. $210,000 c. $20,000 d. $30,000 e. Other

3. The costing method that can be used most easily with break-even analysis is:
a. Variable costing. c. Absorption costing

4. Brown Corp. manufactures a gas barbecue grill. Brown's information for last year:
Cost per unit under absorption costing $46
Fixed manufacturing overhead cost for the year $425,000
Fixed selling and administrative cost for the year $125,000
Units (grills) produced and sold 25,000
What is Brown's variable costing unit product cost?
a. $29 b. $34 c. $58 d. $63 e. Other
5. A manufacturer (makes a single product) provided the following data for the year:
Units in beginning inventory 0
Units produced 6,500
Units sold 6,300
Units in ending inventory 200
Variable costs per unit Fixed Costs
Direct Materials $26
Direct labor $55
Variable manufacturing overhead $6 Fixed manufacturing overhead $130,000
Variable selling and administrative $7 Fixed selling and administrative $69,300
What is the absorption costing unit product cost for the year?
a. $107 b. $94 c. $87 d. $114 e. Other
6. Solo Company is a small manufacturing firm. It has the capacity to produce and sell between 800 units
and 1,200 units of its single product without affecting its total fixed costs. The company was organized and began business
on May 1, 2012. During May 2012, the company expects to produce 1,200 units and sell 1,000 units of its single product.
The company maintains no inventory of work in process. The company has the following revenue and cost structure:
Selling price $60 per unit
Variable manufacturing costs $30 per unit Fixed mfg overhead $3,000 per month
Variable selling expense $15 per unit Fixed selling and admin. $8,000 per month
The company had no finished goods on May 1. It will have 200 finished units at the end of May.
The company has no revenue other than sales and no expense other than those identified above
and income taxes. Under absorption costing, net income before income taxes for May is:
a. $60,000 b $45,000 c. $37,500 d. $4,500 e. Other
7. Continue preceding question. Under variable costing, inventory cost per unit is:
a. $20 b $30 c. $23 d. $38.00. e. Other
8. Weber Company computes net operating income under both the absorption costing
and the variable costing approach. For 2013, the absorption costing net operating income was less
than the variable costingnet operating income. This fact suggests that:
a. variable manufacturing costs were less than fixed manufacturing costs.
b. more units were produced during the year than were sold.
c. more units were sold during the year than were produced.
9. Schrick Inc. manufactures a variety of products. Variable costing net operating
income was $86,800 last year. Ending inventory increased by 1,900 units during last year.
Fixed manufacturing overhead cost was $6 per unit. Absorption costing net operating income was:
a. $86,800 b. $75,400 c. $98,200 d. $11,400 e. Other
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Ans No.
C 1 Good Corporation - Direct Costing for First Year of Operation
Selling price per unit $12.00
Number of units produced 100,000
Number of units sold 90,000
Sales $ 1,080,000
Variable Manufacturing Costs
Materials $4.00 $400,000
Labor $3.00 $300,000
Variable Overhead $2.00 $200,000
Manufacturing Costs for 100,000 units $9.00 $900,000
Ending Inventory-10,000 units ($90,000)
Variable manufacturing cost of goods sold ($810,000)
Variable selling and administrative $1.00 ($90,000)
Margin $180,000
Fixed Manufacturing Expenses ($100,000)
Fixed Selling and Administrative Expenses ($60,000)
Net Operating Income $20,000

D 2 Good Corporation - Absorption Costing for First Year of Operation

Selling price per unit $12.00
Number of units produced 100,000
Number of units sold 90,000
Sales $1,080,000
Variable and Fixed Manufacturing Costs
Materials $4.00 $400,000
Labor $3.00 $300,000
Variable Overhead $2.00 $200,000
Fixed Manufacturing $1.00 $100,000
Manufacturing Costs for 100,000 units $10.00 $1,000,000
Ending Inventory-10,000 units ($100,000)
Manufacturing cost of goods sold (900,000)
Gross Margin 180,000
Variable selling and administrative expenses $1.00 (90,000)
Fixed Selling and Administrative Expenses ($60,000)
Net Operating Income 30,000

A 3
A 4 Brown Corporation manufactures a gas barbecue grill.
This information relates to Brown's last year:
Cost per unit under absorption costing $46
Fixed manufacturing overhead cost for the year $425,000
Fixed selling and administrative cost for the year $125,000
Units (grills) produced and sold 25,000
What is Brown's variable costing unit product cost?

Fixed manufacturing overhead cost for the year $300,000

Units (grills) produced and sold 25,000
Fixed cost per unit $17
Cost per unit under absorption costing $46
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Cost per unit under variable costing $29

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A 5 A manufacturer ( makes a single product).

Units in beginning inventory 0
Units produced 6,500
Units sold 6,300
Units in ending inventory 200
Variable costs per unit
Direct Materials $26 $26
Direct labor $55 $55
Variable manufacturing overhead $6 $6
Variable selling and administrative $7
Fixed Costs
Fixed manufacturing overhead $130,000 $20
Fixed selling and administrative $69,300
Absorption costing unit product cost for the period? $107
D 6 Solo Company is a small manufacturing firm, organized and began business on May 1, 2010..
It has the capacity to produce and sell between 800 units and 1,200 units of its
single product without affecting its total fixed costs.
During May 2010, the company expects to produce 1,200 units and
sell 1,000 units of its single product.
The company has the following revenue and cost structure: Unit Mfg. Cost
Production Units 1,200
Sales Units 1,000
Selling price Per unit $60
Variable manufacturing costs Per unit $30 $30
Variable selling expense Per unit $15
Fixed manufacturing overhead Per month $3,000 $2.50
Fixed selling and admin. expense Per month $8,000
The company maintains no inventory of work in process.
The company began the month of May with no finished goods on hand.
It expects to have 200 finished units at the end of May, 2008.
The company has no revenue other than sales and no expense other than those
identified above and income taxes.
Absorption costing, Solo’s net income before income taxes for May is:
Absorption cost per unit $32.50
Unit sales 1,000
Selling price per unit $60
Sales dollars $60,000
Cost of sales ($32,500)
Gross margin $27,500
Variable sellilng expense $15,000
Fixed selling and Admin. $8,000 $23,000
Net income $4,500
B 7 Variable cost per unit $30
C 8
C 9 Net income under variable costing $86,800
Increase in ending inventory 1,900
Fixed overhead per unit $6
Fixed overhead in ending inventory $11,400
Absorption net income $98,200