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Exam 6: Variable Costing for Management Analysis

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Question 71

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Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

A) True
B) False

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Question 72

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A change in the amount of sales can be due to either a change in the units sold or a change in price or both.

A) True
B) False

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Question 73

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

Which of the following would not be an appropriate activity base for cost analysis in a service firm?

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.

Under absorption costing, which of the following costs would not be included in finished goods inventory?

A business operated at 100% of capacity during its first month and incurred the following costs: If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what is the amount of the manufacturing margin that would be reported on the variable costing income statement?

If the variable selling and administrative expenses totaled $120,000 for the year (80,000 units at $1.50 each) and the planned variable selling and administrative expenses totaled $136,500 (78,000 units at $1.75 each) , the effect of the unit cost factor on the change in contribution margin is:

In which of the following types of firms would it be appropriate to prepare contribution margin reporting and analysis?

Contribution margin reporting can be beneficial for analyzing which of the following?

Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affect the amount of income from operations reported under absorption costing.

The relative distribution of sales among various products sold is referred to as the:

Management will use both variable and absorption costing in all of the following activities except:

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

Under absorption costing, the cost of finished goods includes direct materials, direct labor, and all factory overhead.

Costs that can be influenced by management at a specific level of management are called:

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

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

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

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.