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Exam 20: Variable Costing for Management Analysis

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Question 1

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The level of inventory of a manufactured product has increased by 8,000 units during a period.The following data are also available: ​ What would be the effect on income from operations if absorption costing is used rather than variable costing?

A) $80,000 decrease
B) $80,000 increase
C) $104,000 increase
D) $104,000 decrease

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

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B

Question 2

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In variable costing,the cost of products manufactured is composed of only those manufacturing costs that increase or decrease as the volume of production rises or falls.

A) True
B) False

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Question 3

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Under absorption costing,the amount of income reported from operations can be increased by producing more units than are sold.

For a period during which the quantity of product manufactured equals the quantity sold,income from operations reported under absorption costing will be smaller than the income from operations reported under variable costing.

For a period during which the quantity of inventory at the end was larger than that at the beginning,income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

In the long run,for a business to remain in operation,the revenues from products sold should normally cover all costs and expenses and provide a reasonable income.

Which of the following is not true when determining the selling price for a product?

In contribution margin analysis,the unit price or unit cost factor is computed as the difference between the actual unit price or unit cost and the planned unit price or unit cost,multiplied by the actual quantity sold.

For a period during which the quantity of product manufactured exceeded the quantity sold,income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.

For short-run production planning,information in the variable costing format is more useful to management than is information in the absorption costing concept format.

S&P Enterprises sold 10,000 units of inventory during a given period.The level of inventory of the manufactured product remained unchanged.The manufacturing costs were as follows: ​ Which of the following statements is true?

Presented below are the major categories or captions that would appear on an income statement prepared in the variable costing format: Contribution margin Fixed costs Income from operations Manufacturing margin Sales Variable cost of goods sold Variable selling and administrative expenses

If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled $799,500 (78,000 units at $10.25 each) ,the effect of the quantity factor on the change in sales is:

Which of the following statements is correct using the direct costing concept?

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,what is the amount of the contribution margin that would be reported on the variable costing income statement?

On January 1 of the current year,Townsend Co.commenced operations.It operated its plant at 100% of capacity during January.The following data summarized the results for January: ​

On October 31,the end of the first month of operations,Morristown & Co.prepared the following income statement based on absorption costing: ​ If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600,prepare an income statement using variable costing.

What is the amount of the income from operations that would be reported on the absorption costing income statement?

For a period during which the quantity of product manufactured exceeded the quantity sold,income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

The taxes on the factory superintendent's salary would be included as part of the cost of products manufactured under the variable costing concept.