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Exam 7: Variable Costing: a Tool for Management

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Question 31

True/False

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Suppose fewer units are sold in year 2 than in year 1. If production exceeds sales in year 2, net operating income under absorption costing could be higher in year 2 than in year 1.

A) True
B) False

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Question 32

Multiple Choice

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Which of the following statements is true for a company that uses variable costing?

A) The unit product cost changes as a result of changes in the number of units manufactured.
B) Both variable selling costs and variable production costs are included in the unit product cost.
C) Net operating income moves in the same direction as sales.
D) Net operating income is greatest in periods when production is highest.

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

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Question 33

Multiple Choice

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Crystal Company produces a single product. The company's variable costing income statement for the month of May appears below: The company produced 80,000 units in May and the beginning inventory consisted of 25,000 units. Variable production costs per unit and total fixed costs have remained constant over the past several months. -The dollar value of the company's inventory on May 31 under the absorption costing method would be:

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?

Boyar Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years: Required: a. Determine the absorption costing net operating income last year. Show your work! b. Determine the absorption costing net operating income this year. Show your work!

Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost. -The contribution margin per unit was:

Profits move in the same direction as sales when variable costing is used if selling prices, the sales mix, and the cost structure remain the same.

Slovick Inc., which produces a single product, has provided the following data for its most recent month of operations: There were no beginning or ending inventories. -The unit product cost under absorption costing was:

Last year, Wardrup Corporation's variable costing net operating income was $67,200. Fixed manufacturing overhead costs released from inventory under absorption costing amounted to $600. What was the absorption costing net operating income last year?

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?

When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income.

Jarmon Company, which has only one product, has provided the following data concerning its most recent month of operations: The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. -What is the net operating income for the month under variable costing?

Mascioli Corporation produces a single product and has the following cost structure: Required: Compute the unit product cost under variable costing. Show your work!

Mcgougan Corporation produces a single product and has the following cost structure: -The unit product cost under absorption costing is:

Cardwell Corporation manufactures a variety of products. Last year, the company's variable costing net operating income was $63,900 and ending inventory increased by 900 units. Fixed manufacturing overhead cost per unit was $3. Required: Determine the absorption costing net operating income for last year. Show your work!

Abdol Company, which has only one product, has provided the following data concerning its most recent month of operations: -The total gross margin for the month under the absorption 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?

Hackney 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: -What is the total period cost for the month under the variable costing approach?

Direct labor is always considered to be a product cost under variable costing.