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Exam 6: Variable Costing: a Tool for Management

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Question 31

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What is the cause of the difference between absorption costing net operating income and variable costing net operating income?

A) Absorption costing deducts all manufacturing costs from net operating income;variable costing deducts only prime costs.
B) Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories;variable costing considers all fixed manufacturing costs to be period costs.
C) Absorption costing includes variable manufacturing costs in product costs;variable costing considers variable manufacturing costs to be period costs.
D) Absorption costing includes fixed administrative costs in product costs;variable costing considers fixed administrative costs to be period costs.

E) C) and D)
F) A) and C)

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Question 32

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Last year,Gransky Corporation's variable costing net operating income was $52,100 and its ending inventory increased by 400 units.Fixed manufacturing overhead cost was $7 per unit.What was the absorption costing net operating income last year?

A) $52,100
B) $2,800
C) $54,900
D) $49,300

E) A) and B)
F) B) and C)

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Question 33

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Net operating income is not affected by changes in production when absorption costing is used.

Abdol Company,which has only one product,has provided the following data concerning its most recent month of operations: -What is the net operating income for the month under variable costing?

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the net operating income for the month under variable costing?

Hackney Company,which has only one product,has provided the following data concerning its most recent month of operations: -What is the total period cost for the month under the variable costing approach?

Friddell Inc. ,which produces a single product,has provided the following data for its most recent month of operation: The company had no beginning or ending inventories. Required: Compute the unit product cost under variable costing.Show your work!

Dearman Company,which has only one product,has provided the following data concerning its most recent month of operations: -What is the total period cost for the month under the variable costing approach?

Elder Company,which has only one product,has provided the following data concerning its most recent month of operations: -What is the net operating income for the month under absorption costing?

A cost that would be included in product costs under both absorption costing and variable costing would be:

Mafli Company,which has only one product,has provided the following data concerning its most recent month of operations: Required: a.What is the unit product cost for the month under variable costing? b.What is the unit product cost for the month under absorption costing? c.Prepare a contribution format income statement for the month using variable costing. d.Prepare an income statement for the month using absorption costing. e.Reconcile the variable costing and absorption costing net operating incomes for the month.

Ilford Company,which has only one product,has provided the following data concerning its most recent month of operations: -What is the net operating income for the month under variable costing?

Hackney Company,which has only one product,has provided the following data concerning its most recent month of operations: -The total contribution margin for the month under the variable costing approach is:

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the absorption costing unit product cost for the month?

The costing method that can be used most easily with break-even analysis and other cost-volume-profit techniques is:

Bawcutt Company,which has only one product,has provided the following data concerning its most recent month of operations: -What is the unit product cost for the month under absorption costing?

Fowler Company manufactures a single product.Operating data for the company and its absorption costing income statements for the last two years are presented below: Variable manufacturing costs are $6 per unit.Fixed manufacturing overhead totals $72,000 in each year.This overhead is applied at the rate of $4 per unit.Variable selling and administrative expenses are $2 per unit sold. Required: a.What was the unit product cost in each year under variable costing? b.Prepare new income statements for each year using variable costing. c.Reconcile the absorption costing and variable costing net operating income for each year.

Silver Company produces a single product.Last year,the company's variable production costs totaled $7,500 and its fixed manufacturing overhead costs totaled $4,500.The company produced 3,000 units during the year and sold 2,400 units.There were no units in the beginning inventory.Which of the following statements is true?

During its first year of operations,Holt Manufacturing Company incurred the following costs to produce 200,000 units of its only product: Holt also incurred the following costs in the sale of 180,000 units of product during its first year: Assume that direct labor is a variable cost. -What would be the cost per unit of Holt's finished goods inventory at the end of the first year of operations under the absorption costing method?

Weber Company computes net operating income under both the absorption costing approach and the variable costing approach.For a given year the absorption costing net operating income was greater than the variable costing net operating income.This fact suggests that: