FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 19: Variable Costing and Performance Reporting

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

Dent Corporation had net income of $182,000 based on variable costing. Beginning and ending inventories were 5,000 units and 8,000 units, respectively. Assume the fixed overhead per unit was $3 for both the beginning and ending inventory. What is net income under absorption costing?

A) $173,000
B) $221,000
C) $191,000
D) $143,000
E) $185,000

F) A) and C)
G) B) and C)

Correct Answer

verified

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

Given the following data, total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing. $\begin{array} { | l | c | } \hline \text { Direct labor } & \$ 9 \text { per unit } \\\hline \text { Direct materials } & \$ 7 \text { per unit } \\\hline \text { Overhead } & \\\hline \text { Total variable overhead } & \$ 45,000 \\\hline \text { Total fixed overhead } & \$ 27,000 \\\hline & \\\hline \text { Expected units to be produced } & 9,000 \text { units } \\\hline\end{array}$

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

Essay

Review LaterAdd Note

What costs are treated as product costs under the variable costing method?

The bottom line of a contribution margin report is net income.

Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end the company reported the following income statement using absorption costing. $\begin{array}{lr}\text { Sales }(8,500 \times \$ 45) & \$ 382,500 \\\text { Cost of goods sold }(8,500 \times \$ 20) & 170,000 \\\text { Gross margin } & \$ 212,500 \\\text { Selling and administrative expenses } & 60,000\\\text { Net Income }&\$152,500\end{array}$ Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced) . Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

Fixed costs change in the short run depending upon management's decision to accept or reject special orders.

Assume a company sells a given product for $75 per unit. How many units must be sold to break-even if variable selling costs are $12 per unit, variable production costs are $23 per unit, and total fixed costs are $700,000?

A company is currently operating at 75% capacity and producing 3,000 units. Current cost information relating to this production is shown in the table below. $\begin{array} { | l | c | } \hline & \text { Per Unit } \\\hline \text { Sales price } & \$ 43 \\\hline \text { Direct material } & \$ 7 \\\hline \text { Direct labor } & \$ 6 \\\hline \begin{array} { l } \text { Variable } \\\text { overhead }\end{array} & \$ 4 \\\hline \text { Fixed overhead } & \$ 4 \\\hline\end{array}$ The company has been approached by a customer with a request for a 200 unit special. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

Romtech Company sold 43,000 units of its product at a price of $300 per unit. Total variable cost per unit is $175, consisting of $168 in variable production cost and $7 in variable selling and administrative cost. Compute the manufacturing margin for the company under variable costing.

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Given the following data, total product cost per unit under absorption costing is $11.40. $\begin{array} { | l | c | } \hline \text { Direct labor } & \$ 5 \text { per unit } \\\hline \text { Direct materials } & \$ 6 \text { per unit } \\\hline \text { Overhead c } & \\\hline \text { Total variable overhead } & \$ 32,800 \\\hline \text { Total fixed overhead } & \$ 164,000 \\\hline & \\\hline \text { Expected units to be produced } & 82,000 \text { units } \\\hline\end{array}$

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing. $\begin{array} { | l | l | } \hline \text { Direct labor } & \$ 2 \text { per unit } \\\hline \text { Direct materials } & \$ 8 \text { per unit } \\\hline \text { Overhead } & \\\hline \text { Total variable overhead } & \$ 37,500 \\\hline \text { Total fixed overhead } & \$ 249,000 \\\hline & \\\hline \text { Expected units to be produced } & 15,000 \text { units } \\\hline\end{array}$

Advanced Company reports the following information for the current year. All beginning inventory amounts equaled $0 this year. $\begin{array} { l l } \text { Units produced this year } & 25,000 \text { units } \\\text { Units sold this year } & 15,000 \text { units } \\\text { Direct materials } & \$ 9 \text { per unit } \\\text { Direct labor } & \$ 11 \text { per unit } \\\text { Variable overhead } & \$ 75,000 \text { in total } \\\text { Fixed overhead } & \$ 137,500 \text { in total }\end{array}$ -Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

Contribution margin is another way to refer to gross margin.

________________________ costing treats fixed overhead as a period cost.

Star Services, Inc., a manufacturer of telescopes, began operations on October 1 of the current year. During this time, the company produced 50,000 units and sold 35,000 units at a sales price of $500 per unit. Cost information for this year is shown below. $\begin{array}{l}\text { Production costs }\\\text { Direct materials } & \$ 85 \text { per unit } \\\text { Direct labor } & \$ 65 \text { per unit } \\\text { Variable overhead } & \$ 200,000 \text { in total } \\\text { Fixed overhead } & \$ 350,000 \text { in total }\\\text { Non-production costs }\\\text { Variable selling and administrative }&\$ 90,000 \text { in total }\\\text { Fixed selling and administrative }&\$ 500,000 \text { in total }\\\end{array}$ -Given the Star Services Inc. data, what is net income using variable costing?

Assume a company sells a given product for $33.28 per unit. How many units must the company sell to break-even if variable selling costs are $1.40 per unit, variable production costs are $23.56 per unit, and total fixed costs are $2,080,000?

Countdown Inc., sold 17,000 units of its product at a price of $81 per unit. Total variable cost per unit is $72.09, consisting of $69.05 in variable production cost and $3.04 in variable selling and administrative cost. Compute the contribution margin for the company.

Castaway Company reports the following first year production cost information. $\begin{array} { l l } \text { Units produced } & 53,000 \text { units } \\\text { Units sold } & 51,000 \text { units } \\\text { Direct labor } & \$ 8 \text { per unit } \\\text { Direct materials } & \$ 4 \text { per unit } \\\text { Variable overhead } & \$ 2,173,000 \text { in total } \\\text { Fixed overhead } & \$ 3,339,000 \text { in total }\end{array}$ (a.) Compute production cost per unit under variable costing. (b.) Compute production cost per unit under absorption costing. (c.) Determine the cost of ending inventory using variable costing. (d.) Determine the cost of ending inventory using absorption costing.

Triton Industries reports the following information regarding its production cost. $\begin{array} { l l } \text { Units produced } & 77,000 \text { units } \\\text { Direct labor } & \$ 27 \text { per unit } \\\text { Direct materials } & \$ 12 \text { per unit } \\\text { Variable overhead } & \$ 2,541,000 \text { in total } \\\text { Fixed overhead } & \$ 3,311,000 \text { in total }\end{array}$ (a.) Compute production cost per unit under variable costing. (b.) Compute production cost per unit under absorption costing.