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Exam 21: Variable Costing for Management Analysis

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Question 51

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The amount of income under absorption costing will equal the amount of income under variable costing when units manufactured

A) exceed units sold
B) equal units sold
C) are less than units sold
D) are equal to or greater than units sold

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

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Question 52

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A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, the amount of manufacturing margin that would be reported on the absorption costing income statement is

A) $50,000
B) $54,000
C) not reported
D) $70,000

E) B) and D)
F) All of the above

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Question 53

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Tony's Company has the following information for March: Determine the March (a) manufacturing margin, (b) contribution margin, and (c) operating income for Tony's Company.

For internal decision-making purposes, managers may use EBITDA as a substitute for the contribution margin.

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields gross profit.

During the first year of operations, 18,000 units were manufactured and 13,500 units were sold. On August 31, Olympic Inc. prepared the following income statement based on the variable costing concept: Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.

Which of the following terms is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?

The contribution margin and the manufacturing margin are usually equal.

The major categories or captions that would appear on an income statement prepared in the variable costing format are as follows: Contribution margin Fixed costs Manufacturing margin Operating income Sales Variable cost of goods sold Variable selling and administrative expenses a.Arrange these captions in the proper order in accordance with the variable costing concept. b.Which of the captions represents (1) the difference between sales and the total of all the variable costs and expenses and (2) the remaining amount of revenue available for fixed manufacturing costs, fixed expenses, and net income?

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: The effect on operating income if variable costing is used rather than absorption costing would be a(n)

Which of the following would be included in the cost of a product manufactured according to variable costing?

Match each of the following descriptions with the appropriate costing concept (a-c). -Generally provides the most useful report for setting long-term prices A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

Which of the following would be included in the cost of a product manufactured according to absorption costing?

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.

Match each of the following descriptions with the appropriate costing concept (a-c). -Generally provides the most useful report for controlling costs A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

For a period during which the quantity of inventory at the end equals the inventory at the beginning, operating income reported under variable costing will equal operating income reported under absorption costing.

Variable costing is appropriate only for manufacturing firms, not for service firms.

If the ability to sell and the amount of production facilities devoted to each of two products are equal, it is profitable to increase the sales of that product with the lowest contribution margin.

Variable costing is also known as direct costing.

For an accounting period during which the quantity of inventory at the end is smaller than the quantity at the beginning, operating income reported under variable costing will be larger than operating income reported under absorption costing.