FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Variable Costing and Performance Reporting

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

Wind Fall, a manufacturer of leaf blowers, began operations this year.During this year, the company produced 10,000 leaf blowers and sold 8,500.At year-end the company reported the following income statement using absorption costing: $\begin{array}{lr}\text { Sales } (8,500 \times \$ 45) &\$ 382,500 \\\text { Cost of goods sold }(8,500 \times \$ 20) &\underline{170,000} \\\text { Gross margin } &\$ 212,500 \\\text { Selling and administrative expenses } &\underline{60,000 }\\\text { Net income } &\underline{\$ 152,500}\end{array}$ Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced) .Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

A) $146,500
B) $158,500
C) $237,500
D) $206,500
E) $246,500

Correct Answer

verified

Show Answer

Question 2

True/False

Review LaterAdd Note

Review Later

Given the following data, total product cost per unit under absorption costing is $9.14. $\begin{array} { | l | c | } \hline \text { Direct labor } & \mathbf { \$ 0 . 7 2 p e r ~ u n i t ~ } \\\hline \text { Direct rmaterials } & \mathbf { \$ 0 . 8 0 p e r ~ u n i t } \\\hline \text { Overhead } & \\\hline \text { Total variable overhead } & \$ 202,500 \\\hline \text { Total fixed overhead } & \$ 140,400 \\\hline & \\\hline \text { Expected urits to be produced } & 45,000 \text { units } \\\hline\end{array}$

Correct Answer

verified

Show Answer

Question 3

True/False

Review LaterAdd Note

The traditional income statement format used for financial reporting is called the contribution margin format.

The use of absorption costing can result in misleading product cost information.

A company reports the following information for its first year of operations: $\begin{array}{ll}\text { Units produced this year } & 650 \text { units } \\\text { Units sold this year } & 500 \text { units } \\\text { Direct materials } & \$ 750 \text { per unit } \\\text { Direct labor } & \$ 1,000 \text { per unit } \\\text { Variable overhead } & ? \text { in total } \\\text { Fixed overhead } & \$ 308,750 \text { in total }\end{array}$ If the company's cost per unit of finished goods using variable costing is $2,375, what is total variable overhead?

The bottom line of a contribution margin report is net income.

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing. $\begin{array} { | l | l | } \hline \text { Direct labor } & \$ 2 \text { per unit } \\\hline \text { Direct materials } & \$ 8 \text { per unit } \\\hline \text { Overhead } & \\\hline \text { Total variable overhead } & \$ 37,500 \\\hline \text { Total fixed overhead } & \$ 249,000 \\\hline & \\\hline \text { Expected urits to be produced } & 15,000\text { units } \\\hline\end{array}$

How will net income under variable costing compare to net income under absorption costing in the following three situations? Explain briefly the cause of any differences. (a)Units produced equal units sold (b)Units produced exceed units sold (c)Units produced are less than units sold

Sea Company reports the following information regarding its production cost. $\begin{array}{ll}\text { Units produced } & 42,000 \text { units } \\\text { Direct labor } & \$ 35 \text { per unit } \\\text { Direct materials } & \$ 28 \text { per unit } \\\text { Variable overhead } & \$ 17 \text { per unit } \\\text { Fixed overhead } & \$ 105,000 \text { in total }\end{array}$ Compute production cost per unit under variable costing.

The biggest problems with producing too much are lost sales and customer dissatisfaction.

It is not possible to convert reports prepared using variable costing to absorption costing reports.

To convert variable costing net income to absorption costing net income, ____________________ the fixed production cost in ending inventory and _______________________ the fixed production cost in beginning inventory.

Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

Fanelli Company had net income of $678,000 based on variable costing.Beginning and ending inventories were 5,000 units and 4,200 units, respectively.Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory.What is net income under absorption costing?

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

Red and White Company reported the following monthly data: $\begin{array}{ll}\text { Units produced } & 2,000 \text { units } \\\text { Sales price } & \$ 25 \text { per unit } \\\text { Direct materials } & \$ 1 \text { per unit } \\\text { Direct labor } & \$ 2 \text { per unit } \\\text { Variable overhead } & \$ 3 \text { per unit } \\\text { Fixed overhead } & \$ 8,000 \text { in total }\end{array}$ -What is Red and White's net income under absorption costing if 980 units are sold and operating expenses are $12,000?

Dataport Company reports the following annual cost data for its single product: $\begin{array}{ll}\text { Normal production and saleslevel } & 89,000 \text { units } \\\text { Direct materials } & \$ 14.00 \text { per unit } \\\text { Direct labor } & \$ 21.00 \text { per unit } \\\text { Variable overhead } & \$ 27.00 \text { per unit } \\\text { Fixed overhead } & \$ 3,738,000 \text { in total }\end{array}$ This product is normally sold for $230 per unit.If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.

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

Under absorption costing, a company had the following unit costs when 8,000 units were produced. $\begin{array}{lr}\text { Direct labor } & \$ 8.50 \text { per unit } \\\text { Direct material } & \$ 9.00 \text { per unit } \\\text { Variable overhead } & \$ 6.75 \text { per unit } \\\text { Fixed overhead }(\$ 60,000 / 8,000 \text { units }) &\underline{ \$ 7.50 \text { per unit }} \\\text { Total production cost } & \underline{\$ 31.75 \text { per unit }}\end{array}$ Compute the total production cost per unit under variable costing if 20,000 units had been produced.

Shore Company reports the following information regarding its production cost: $\begin{array}{ll}\text { Units produced } & 28,000 \text { units } \\\text { Direct labor } & \$ 23 \text { per unit } \\\text { Direct materials } & \$ 24 \text { per unit } \\\text { Variable overhead } & \$ 280,000 \text { per unit } \\\text { Fixed overhead } & \$ 94,920 \text { in total }\end{array}$ Compute production cost per unit under variable costing.