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Exam 6: Variable Costing and Analysis

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Question 61

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When excess capacity exists, what is the minimum special order price a manager should accept to increase net income?

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With excess capacity, increases in produ...

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Question 62

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Blatt Company, a manufacturer of slippers, began operations on June 1 of the current year. During this time, the company produced 210,000 units and sold 185,000 units at a sales price of $40 per unit. Cost information for this period is shown in the following table: a. Prepare Blatt's December 31^st income statement for the current year under absorption costing. b. Prepare Blatt's December 31^st income statement for the current year under variable costing.

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Question 63

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A company is currently operating at 80% capacity producing 5,000 units. Current cost information relating to this production is shown in the table below: The company has been approached by a customer with a request for a 100-unit special order. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

When setting long-term sales prices for products, the sales price must cover all costs, including fixed costs.

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

Many companies link manager bonuses to income computed under absorption costing because this is how income is reported to shareholders.

Castaway Company reports the following first year production cost information: a. Compute production cost per unit under variable costing. b. Compute production cost per unit under absorption costing. c. Determine the cost of ending inventory using variable costing. d. Determine the cost of ending inventory using absorption costing.

For short-term pricing decisions, absorption costing is an appropriate costing method to use.

What is the general procedure for converting variable costing net income to absorption costing net income?

What is Red and White's net income under variable costing if 980 units are sold and operating expenses are $12,000?

Under an income statement prepared using absorption costing, expenses are grouped according to cost behavior.

Materials Corporation sold 12,000 units of its product at a price of $67 per unit. Total variable cost per unit is $54.94, consisting of $45.05 in variable production cost and $9.89 in variable selling and administrative cost. Compute the contribution margin for the company.

________ is a costing method that includes all manufacturing costs in unit product costs.

Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under absorption costing.

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using variable costing is $2.02, what is the amount of total fixed overhead?

When evaluating a special order, management should:

What is Red and White's contribution margin for this month if 980 units were sold?

A company reports the following information for its first year of operations: If the company's cost per unit of finished goods using absorption costing is $27, how many units were produced?

Cost information from both absorption costing and variable costing can aid managers in pricing.

Which of the following statements is true?