CHAPTER 5
Variable Costing
Summary of Questions by Objectives and Bloom’s Taxonomy
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Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-2
TRUE-FALSE STATEMENTS
1. The cost of ending inventory using variable costing is always greater than or equal to full
costing ending inventory.
2. The cost of goods sold is always greater using variable costing than when full costing is
used.
3. During periods in which inventory levels increase, sales revenue will be larger when using
full costing than if variable costing is used.
4. Absorption costing is another name for variable costing.
5. If a company has no fixed costs, variable costing income will equal full costing income,
regardless of any increase or decrease in inventory levels during the period.
6. Variable costing income is more useful for decision making because costs are separated by
function.
7. Absorption costing is required for external reporting under generally accepted accounting
principles.
8. Under full costing, all fixed costs of production are included in Finished Goods Inventory
and remain there until all inventory units are sold.
9. The total amount reported on an income statement for selling and administrative expenseis
the same amount regardless if variable of full costing is used. .
10. In variable costing, fixed manufacturing overhead is considered a period cost.
11. Income statements of manufacturing firms prepared for external purposes use variable
costing because it provides higher profits for making decisions.
12. Under full costing, ending inventory includes both fixed and variable manufacturing and
nonmanufacturing costs.
13. Under variable costing, ending inventory reported on a company’s balance sheet includes
variable production costs and variable selling and administrative costs.
14. Contribution margin is reported on an absorption costing income statement.
15. If the number of units sold is equal to the number of units produced, then contribution
margin will equal gross margin.
16. Full costing income can be increased by decreasing production even though the additional
inventory items will not be sold during the current period.
17. When the number of units produced exceeds the number of units sold, variable costing
yields a lower net income than if full costing had been used.
Chapter 5 Variable Costing
5-3
18. Under variable costing, net income can be increased by increasing production without
increasing sales.
19. The inventoriable cost per unit can be reduced, under variable costing, by decreasing the
number of units produced.
20. When the number of units produced is greater than the number of units sold, variable
costing yields higher income than full costing.
21. A full costing income statement will display a higher net income than variable costing as
long as inventory levels continue to increase.
22. If a company increases production levels without increasing its units sold, both its full
costing income and cash flows will be larger than if production were at a lower level.
23. Just-in-time (JIT) inventory management systems cause the difference between variable
costing income and full costing income to be much greater than if standard inventory levels
had been maintained by the company.
24. The use of variable costing encourages management of earnings by adjusting production
volume.
25. Variable costing facilitates CVP analysis.
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-4
MULTIPLE CHOICE
26. Full costing
A. is another name for variable costing.
B. considers fixed manufacturing overhead as an inventory cost.
C. often provides the information needed for CVP analysis.
D. considers fixed production cost as period cost.
27. Which of the following is accounted for differently in full costing compared to variable
costing?
A. Direct material
B. Fixed manufacturing overhead
C. Direct labor
D. Variable manufacturing overhead
28. Which of the following is accounted for as a product cost in variable costing?
A. Product delivery costs to customers
B. Variable manufacturing overhead
C. Fixed manufacturing overhead
D. Product advertising costs
29. Which of the following is treated as a product cost in full costing?
A. Sales commissions
B. Product advertising
C. Depreciation on factory machines
D. Security at corporate headquarters
30. Full costing is
A. more useful for decision making than variable costing because it treats all costs of
production as an inventory cost.
B. required for financial reporting under generally accepted accounting principles.
C. less likely to enable managers to manipulate income by increasing production.
D. based on cost behavior.
31. In variable costing, when does fixed manufacturing overhead become an expense?
A. Never
B. In the period when the product is sold
C. In the period when the expense is incurred
D. At the time when units are produced
32. In full costing, when does fixed manufacturing overhead become an expense?
A. In the period when all other fixed costs are expensed
B. In the period when the product is sold
C. In the period when the expense is incurred
D. At the time units when are produced
33. In variable costing, which of the following will be included as part of inventory on a
company’s balance sheet?
A. Fixed production cost
B. Variable selling cost
C. Fixed selling costs
D. None of the answer choices will be part of inventory in variable costing.
Chapter 5 Variable Costing
5-5
34. In full costing, which of the following will be included as part of inventory on a company’s
balance sheet?
A. Fixed production cost
B. Variable selling cost
C. Fixed selling costs
D. None of the answer choices will be in inventory in full costing.
35. Rango Enterprises’ manufacturing costs for 2017 are as follows:
Direct materials $ 65,000
Direct labor 118,000
Manufacturing supplies 9,000
Depreciation of factory equipment 22,000
Other fixed manufacturing overhead 43,000
What amount should be considered as product costs for external reporting purposes?
A. $183,000
B. $192,000
C. $257,000
D. $248,000
36. Sticker Creations’ fixed manufacturing overhead costs totaled $68,000 and its variable
selling costs totaled $45,000. Under full costing, how should these costs be classified?
Period Costs Product Costs
A. $68,000 $45,000
B. $113,000 $0
C. $0 $113,000
D. $45,000 $68,000
37. Diecast Tools’ manufacturing costs for 2017 are as follows:
Direct materials $100,000
Direct labor 120,000
Depreciation of factory equipment 30,000
Production supervisor’s salary 72,000
Other fixed manufacturing overhead 50,000
What amount should be considered product costs for external reporting purposes?
A. $220,000
B. $293,000
C. $402,000
D. $372,000
38. Robley Company’s fixed manufacturing overhead costs totaled $235,000 and fixed
corporate operating costs totaled $116,000. Under full costing, how should these costs be
classified?
Period Costs Product Costs
A. $235,000 $116,000
B. $0 $351,000
C. $351,000 $0
D. $116,000 $235,000
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-6
39. Cold City Blowers produces snow blowers. The selling price per snow blower is $80. Costs
involved in production are:
Direct material per unit $ 22
Direct labor per unit 15
Variable manufacturing overhead per unit 6
Fixed manufacturing overhead per year 206,400
In addition, the company has fixed selling and administrative costs of $88,000 per year.
During the year, Cold City Blowers produced 8,600 snow blowers and sold 8,000 snow
blowers. There is no beginning inventory. Ignoring taxes, how much will full costing net
income differ from variable costing net income?
A. $15,480
B. $14,400
C. $206,400
D. $192,000
40. Which of the following items appears on a variable costing income statement but not on a
full costing income statement?
A. Sales
B. Gross margin
C. Net income
D. Contribution margin
41. Variable costing income is a function of
A. only units sold.
B. only units produced.
C. both units sold and units produced.
D. neither units sold nor units produced.
42. Which of the following items on a variable costing income statement will change in direct
proportion to a change in sales?
A. Sales, contribution margin, and net income
B. Sales, variable costs, and contribution margin
C. Sales, variable costs, contribution margin, fixed costs, and net income
D. Sales, variable costs, and fixed costs
43. If a company’s income is positive and fixed costs exist, which of the following items will
increase or decrease at a greater rate than the change in the amount of sales on a variable
costing income statement?
A. Variable costs
B. Fixed costs
C. Contribution margin
D. Net income
Chapter 5 Variable Costing
5-7
44. Ranger Productions experienced the following costs in 2017:
Direct materials $1.50 per unit
Direct labor $2.60 per unit
Variable manufacturing overhead $1.20 per unit
Variable selling costs $4.40 per unit
Fixed manufacturing overhead $84,000
Fixed selling costs $32,000
Fixed administrative costs $15,000
During 2017, the company manufactured 65,000 units and sold 62,000 units. The unit cost
is the same throughout the year. Beginning inventory is zero. How much will the company
report as total variable product costs on its 2017 contribution income statement?
A. $328,600
B. $601,400
C. $344,500
D. $630,500
45. Anders Supply experienced the following costs in May:
Direct materials $6.50 per unit
Direct labor $2.20 per unit
Manufacturing overhead costs
Variable $3.10 per unit
Fixed $44,000
Selling & administrative costs
Variable selling costs $1.50 per unit
Fixed selling costs $21,000
Fixed administrative costs $16,000
During May, the company manufactured 22,000 units and sold 24,000 units. Beginning
inventory totaled 3,400 units. If the average selling price per unit was $28, how much is the
company’s contribution margin?
A. $327,400
B. $352,800
C. $323,400
D. $344,800
46. Roger Excavating Company experienced the following costs in 2017:
Direct materials $1.75 per unit
Direct labor $2.00 per unit
Variable manufacturing overhead $2.50 per unit
Variable selling $0.75 per unit
Fixed manufacturing overhead $50,000
Fixed selling $15,000
Fixed administrative $5,000
During 2017, the company manufactured 100,000 units and sold 80,000 units. If the
average selling price per unit was $22.65, what is the amount of the company’s contribution
margin per unit?
A. $16.40
B. $15.65
C. $18.90
D. $13.65
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-8
47. Data from Rannier Metals for 2017 is as follows:
Sales $20 per unit
Variable cost of goods sold ??
Fixed manufacturing overhead $85,000
Variable selling & administrative costs ??
Fixed selling & administrative costs $150,000
The company produced 145,000 units during the year and sold 130,000 units. Variable
production costs per unit and fixed costs have remained constant all year. Net income for
the year was $1,000,000. How much was the company’s contribution margin?
A. $765,000
B. $1,235,000
C. $1,365,000
D. Not enough information is provided to determine the answer
48. During the past year, Waxman Electronics manufactured 25,000 speakers during 2017 and
sold 26,000 speakers. Production costs during the year were as follows:
Fixed manufacturing overhead $546,000
Variable manufacturing overhead 234,000
Direct labor 312,000
Direct materials 780,000
Sales totaled $3,120,000, variable selling and administrative costs totaled $182,000, and
fixed selling and administrative costs totaled $114,000. There were 2,200 speakers in
beginning inventory. How much is the contribution margin per unit?
A. $48.00
B. $69.00
C. $62.00
D. None of these answer choices are correct.
49. Cold City Blowers produces snow blowers. The selling price per snow blower is $100.
Costs involved in production are:
Direct material per unit $ 22
Direct labor per unit 15
Variable manufacturing overhead per unit 6
Fixed manufacturing overhead per year 23,400
In addition, the company has fixed selling and administrative costs of $9,360 per year.
During the year, Cold City Blowers produced 780 snow blowers and sold 800 snow
blowers. Beginning inventory consisted of 50 snow blowers. How much is considered to be
product cost under variable costing?
A. $34,400
B. $33,540
C. $29,600
D. None of these answer choices are correct.
Chapter 5 Variable Costing
5-9
50. Cold City Blowers produces snow blowers. The selling price per snow blower is $100.
Costs involved in production are:
Direct material per unit $ 22
Direct labor per unit 15
Variable manufacturing overhead per unit 6
Fixed manufacturing overhead per year 23,400
In addition, the company has fixed selling and administrative costs of $9,360 per year.
During the year, Cold City Blowers produced 780 snow blowers and sold 800 snow
blowers. Beginning inventory consisted of 50 snow blowers. How much is net income using
variable costing?
A. $11,700
B. $12,240
C. $12,840
D. $45,600
51. The following information relates to Charlin Industries for the year ending December 31,
2017, the company’s first year of operations:
Units produced 100,000
Units sold 80,000
Units in ending inventory 20,000
Fixed manufacturing overhead $650,000
How much fixed manufacturing overhead would be expensed in 2017 using variable
costing?
A. $520,000
B. $130,000
C. $650,000
D. $0
52. Sol Enterprises’ contribution income statement utilizing variable costing appears below:
Sol Enterprises
Income Statement
For the Year ended December 31, 2017
Sales ($12 per unit) $240,000
Less variable costs:
Cost of goods sold $100,000
Selling & administrative costs 18,000 118,000
Contribution margin 122,000
Less fixed costs:
Manufacturing overhead 60,900
Selling & administrative costs 15,000 75,900
Net income $ 46,100
Sol produced 21,000 units during the year. Variable costs per unit and fixed production
costs have remained constant the entire year. There were no beginning inventories. How
much is the dollar value of the ending inventory using variable costing?
A. $5,000
B. $7,900
C. $8,800
D. $2,900
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-10
53. Acosta Supplies experienced the following costs in 2017:
Direct materials $1.50 per unit
Direct labor $4.50 per unit
Variable manufacturing overhead $2.00 per unit
Variable selling $1.00 per unit
Fixed manufacturing overhead $70,000
Fixed selling and administrative $80,000
During 2017, the company manufactured 4,000 units and sold 4,200 units. Assume the
same unit costs in all years. Beginning inventory consists of 800 units. How much are total
variable costs on the company’s 2017 contribution margin income statement?
A. $37,800
B. $36,000
C. $33,600
D. $32,000
54. Beiber Boxers contribution income statement utilizing variable costing for 2017 variable
costing appears below:
Sales ($12 per unit) $78,000
Less variable costs:
Cost of goods sold $26,000
Selling & administrative 9,750 35,750
Contribution margin 42,250
Less fixed costs:
Manufacturing overhead 12,600
Selling & administrative costs 14,950 27,550
Net income $ 14,700
The company produced 7,000 units during the year. Variable and fixed production costs
have remained constant the entire year. There were no beginning inventories. How much is
the dollar value of the ending inventory using full costing?
A. $2,000
B. $2,900
C. $3,850
D. None of these answer choices are correct.
55. When the number of units sold is equal to the number of units produced, the net income
using absorption costing will be
A. greater than net income using variable costing.
B. equal to net income using variable costing.
C. less than net income using variable costing.
D. None of the answer choices is always correct.
56. If the number of units sold is greater than the number of units produced,
A. full costing and variable costing will yield the same net income.
B. variable costing will assign some fixed manufacturing costs to the units in ending
inventory.
C. net income will be higher under variable costing than under full costing.
D. inventory levels will increase.
Chapter 5 Variable Costing
5-11
57. Meow Foods had 2,000 25–pound bags of cat food in beginning inventory. During 2017, the
company manufactured 16,000 bags and sold 15,000 units. Assume the same unit costs in
all years. Each bag of food is sold for $17. The company experienced the following costs:
Direct materials $4.50 per unit
Direct labor $2.10 per unit
Variable manufacturing overhead $1.90 per unit
Variable selling $1.00 per unit
Fixed manufacturing overhead $48,000
Fixed selling $24,000
Fixed administrative $30,000
If the company uses full costing, how much will be reported as inventory on the December
31, 2017 balance sheet?
A. $9,000
B. $25,500
C. $28,500
D. $34,500
58. Meow Foods had 2,000 25–pound bags of cat food in beginning inventory. During 2017, the
company manufactured 16,000 bags and sold 15,000 units. Each bag of food is sold for
$17. Assume the same unit costs in all years. The company experienced the following
costs:
Direct materials $4.50 per unit
Direct labor $2.10 per unit
Variable manufacturing overhead $1.90 per unit
Variable selling $1.00 per unit
Fixed manufacturing overhead $48,000
Fixed selling $24,000
Fixed administrative $30,000
If the company uses variable costing, at what amount is the ending inventory for the year
valued?
A. $25,500
B. $28,500
C. $34,500
D. $9,000
59. Macho Enterprises experienced the following costs in 2017:
Direct materials $2.65 per unit
Direct labor $1.80 per unit
Variable manufacturing overhead $3.25 per unit
Variable selling $1.15 per unit
Fixed manufacturing overhead $94,000
Fixed selling $35,000
Fixed administrative $10,000
During the year, the company manufactured 47,000 units and sold 40,000 units. How much
is the unit product cost using full costing?
A. $7.70
B. $9.70
C. $8.85
D. $10.85
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-12
60. Ranger Roadsters experienced the following costs in 2017 (Assume the same unit costs in
all years):
Direct materials $4.85 per unit
Direct labor $2.10 per unit
Manufacturing overhead costs
Variable $2.25 per unit
Fixed $75,075
Selling & administrative costs
Variable selling $0.95 per unit
Fixed selling $8,000
Fixed administrative $2,000
There were 6,000 units in beginning inventory. During the year, the company manufactured
45,500 units and sold 48,000 units. If net income using variable costing was $82,500, how
much is net income using full costing?
A. $78,375
B. $86,625
C. $76,725
D. $88,275
61. The Crab Shack experienced the following costs in 2017 (Assume the same unit costs in all
years):
Direct materials $2.25 per unit
Direct labor $1.50 per unit
Manufacturing overhead costs
Variable $1.10 per unit
Fixed $60,000
Selling & administrative costs
Variable selling $0.80 per unit
Fixed selling $9,000
Fixed administrative $13,000
There were 1,800 units in beginning inventory. During the year, the company manufactured
24,000 units and sold 25,000 units. If net income using variable costing was $76,250, how
much is net income using full costing?
A. $5,880
B. $79,250
C. $73,750
D. $74,350
62. If a company’s levels of total fixed costs and unit variable costs remain unchanged from
one year to the next, under which costing method is it possible for managers to manipulate
net income through production?
A. Variable costing
B. Full costing
C. Both variable and full costing
D. Neither variable nor full costing
63. Full costing income is a function of
A. units sold only.
B. units produced only.
C. both units sold and units produced.
D. neither units sold nor units produced.
Chapter 5 Variable Costing
5-13
64. Which of the following is true when units produced exceed units sold?
A. Full costing and variable costing will yield the same net income.
B. Full costing assigns a portion of the fixed manufacturing costs to the units in ending
inventory.
C. Net income will be higher under variable costing than under full costing.
D. Inventory levels will decrease.
65. Futon Delight experienced the following costs in 2017 (Assume the same unit costs in all
years):
Direct materials $2.00 per unit
Direct labor $1.00 per unit
Manufacturing Overhead Costs:
Variable $1.50 per unit
Fixed $45,000
There were 600 units in beginning inventory. During the year, the company manufactured
18,000 units and sold 17,600 units. If net income for the year was $54,000 using full
costing, how much will net income be if the company uses variable costing?
A. $53,000
B. $50,000
C. $55,000
D. More information is needed to determine the answer.
66. Radial Fuel Cells experienced the following costs in 2017 (Assume the same unit costs in
all years):
Direct materials $4 per unit
Direct labor $8 per unit
Manufacturing Overhead Costs
Variable $2 per unit
Fixed $150,000
Selling & Administrative Costs
Fixed selling $30,000
Variable selling $1 per unit
Fixed administrative $20,000
During the year, the company manufactured 50,000 units and sold 45,000 units. Beginning
inventory is zero. If net income for the year was $265,000 using full costing, what would net
income be if the company used variable costing?
A. $250,000
B. $265,000
C. $270,000
D. $450,000
67. If a company employs JIT inventory techniques, which statement is true?
A. Variable and full costing income will differ very little since there is almost no
inventory on hand.
B. Variable and full costing income will differ very little since there are almost no fixed
costs incurred on production.
C. Variable and full costing income will differ greatly since actual costs are difficult to
determine.
D. Variable and full costing income will differ greatly since there will be a large
difference between gross margin and contribution margin.
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-14
68. Waterloo Skyline experienced the following costs in 2017:
Direct materials $3.15 per unit
Direct labor $2.80 per unit
Variable manufacturing overhead $1.45 per unit
Fixed manufacturing overhead $12.60 per unit
There was no beginning inventory. During the year, the company sold 190,000 units. If net
income using full and variable costing was $939,020 and $905,000, respectively, how many
units did the company produce in 2017?
A. 192,700
B. 2,700
C. 187,300
D. 46,951
69. Which is most consistent with cost-volume-profit analysis?
A. Variable costing
B. Full costing
C. Absorption costing
D. JIT
70. Which method provides an incentive for managers to produce more units in order to
increase income for performance evaluations?
A. Full costing
B. Variable costing
C. Both full costing and variable costing
D. Neither full costing nor variable costing
71. Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these
calculators at a price of $10.00 each. Manufacturing costs consisted of direct labor,
$30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed
manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled
$24,000. Beginning inventory consists of no units. What is Brand Products’ net income
using variable costing?
A. $125,960
B. $149,960
C. $169,740
D. $124,240
72. Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these
calculators at a price of $10.00 each. Manufacturing costs consisted of direct labor,
$30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed
manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled
$24,000. Beginning inventory consists of no units. What is Brand Products’ net income
using full costing?
A. $124,240
B. $125,960
C. $120,720
D. $149,960
Chapter 5 Variable Costing
5-15
73. Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these
calculators at a price of $10.00 each. Manufacturing costs consisted of direct labor,
$30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed
manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled
$24,000. Beginning inventory consists of no units. Brand Products uses variable costing.
How much will the company’s contribution margin increase if sales increase 10%?
A. $16,974
B. $23,000
C. $14,996
D. $12,420
74. Last month, Brand Products manufactured 25,000 calculators and sold 23,000 of these
calculators at a price of $10.00 each. Manufacturing costs consisted of direct labor,
$30,000; direct materials, $32,000; variable manufacturing overhead, $3,500; fixed
manufacturing overhead, $21,500. Selling and administrative costs are all fixed and totaled
$24,000. Beginning inventory consists of no units. Brand Products uses full costing. How
much will the company’s gross margin increase if sales increase 10%?
A. Less than 10%
B. More than 10%
C. 10%
D. It depends on other factors not given.
75. Affinity makes a single product, pool pumps. Information for 2017 appears below:
Sales in units 5,800
Production in units 6,200
Beginning inventory 1,500
Variable production cost per unit $46.00
Variable selling cost per unit $6.00
Fixed production cost per year $31,000
Fixed selling and administrative cost per year $24,000
Selling price per unit $75.00
How much is the contribution margin per unit of inventory?
A. $29.00
B. $24.00
C. $23.00
D. $18.00
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-16
76. Affinity makes a single product, pool pumps. Information for 2017 appears below (Assume
the same unit costs in all years):
Sales in units 5,800
Production in units 6,200
Beginning inventory 1,500
Variable production cost per unit $46.00
Variable selling cost per unit $6.00
Fixed production cost per year $31,000
Fixed selling and administrative cost per year $24,000
Selling price per unit $75.00
How much is the full cost per unit of inventory?
A. $46.00
B. $51.00
C. $57.00
D. $52.00
77. Affinity makes a single product, pool pumps. Information for 2017 appears below (Assume
the same unit costs in all years):
Sales in units 5,800
Production in units 6,200
Beginning inventory 1,500
Variable production cost per unit $46.00
Variable selling cost per unit $6.00
Fixed production cost per year $31,000
Fixed selling and administrative cost per year $24,000
Selling price per unit $75.00
How much is net income for the year under variable costing?
A. $78,400
B. $87,600
C. $80,400
D. None of these answer choices are correct.
78. Affinity makes a single product, pool pumps. Information for 2017 appears below (Assume
the same unit costs in all years):
Sales in units 5,800
Production in units 6,200
Beginning inventory 1,500
Variable production cost per unit $46.00
Variable selling cost per unit $6.00
Fixed production cost per year $31,000
Fixed selling and administrative cost per year $24,000
Selling price per unit $75.00
How much is net income for the year under full costing?
A. $78,400
B. $80,400
C. $87,600
D. None of these answer choices are correct.
Chapter 5 Variable Costing
5-17
79. Affinity makes a single product, pool pumps. Information for 2017 appears below (Assume
the same unit costs in all years):
Sales in units 5,800
Production in units 6,200
Beginning inventory 1,500
Variable production cost per unit $46.00
Variable selling cost per unit $6.00
Fixed production cost per year $31,000
Fixed selling and administrative cost per year $24,000
Selling price per unit $75.00
Under which method will net income be larger?
A. Variable costing
B. Full costing
C. Net income under both the variable and full costing methods will be the same.
D. The answer cannot be determined from the information provided.
80. Affinity makes a single product, pool pumps. Information for 2017 appears below (Assume
the same unit costs in all years):
Sales in units 5,800
Production in units 6,200
Beginning inventory 1,500
Variable production cost per unit $46.00
Variable selling cost per unit $6.00
Fixed production cost per year $31,000
Fixed selling and administrative cost per year $24,000
Selling price per unit $75.00
How much will be reported for inventory on the balance sheet if variable costing is used?
A. $87,400
B. $96,900
C. $108,300
D. $118,400
81. Leesburg Bags produces backpacks. The costs and prices for the backpacks follow
(Assume the same unit costs in all years):
Selling price $23.00 per backpack
Variable costs:
Production $11.00 per backpack
Selling $2.00 per backpack
Fixed Costs:
Production $900,000 per year
Selling and administrative $540,000 per year
Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no
beginning inventory, and costs throughout the year were stable. How much is the cost of
ending inventory under variable costing?
A. $550,000
B. $650,000
C. $730,000
D. $1,450,000
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-18
82. Leesburg Bags produces backpacks. The costs and prices for the backpacks follow
(Assume the same unit costs in all years):
Selling price $23.00 per backpack
Variable costs:
Production $11.00 per backpack
Selling $2.00 per backpack
Fixed Costs:
Production $900,000 per year
Selling and administrative $540,000 per year
Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no
beginning inventory, and costs throughout the year were stable. How much is the cost of
ending inventory under full costing?
A. $730,000
B. $550,000
C. $650,000
D. $938,000
83. Leesburg Bags produces backpacks. The costs and prices for the backpacks follow
(Assume the same unit costs in all years):
Selling price $23.00 per backpack
Variable costs:
Production $11.00 per backpack
Selling $2.00 per backpack
Fixed Costs:
Production $900,000 per year
Selling and administrative $540,000 per year
Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no
beginning inventory, and costs throughout the year were stable. How much is net income
under variable costing?
A. $740,000
B. $848,000
C. $560,000
D. $2,000,000
Chapter 5 Variable Costing
5-19
84. Leesburg Bags produces backpacks. The costs and prices for the backpacks follow
(Assume the same unit costs in all years):
Selling price $23.00 per backpack
Variable costs:
Production $11.00 per backpack
Selling $2.00 per backpack
Fixed Costs:
Production $900,000 per year
Selling and administrative $540,000 per year
Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no
beginning inventory, and costs throughout the year were stable. How much is net income
under full costing?
A. $560,000
B. $380,000
C. $340,000
D. $740,000
85. Leesburg Bags produces backpacks. The costs and prices for the backpacks follow
(Assume the same unit costs in all years):
Selling price $23.00 per backpack
Variable costs:
Production $11.00 per backpack
Selling $2.00 per backpack
Fixed Costs:
Production $900,000 per year
Selling and administrative $540,000 per year
Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no
beginning inventory, and costs throughout the year were stable. How much higher or lower
will variable costing be than full costing income?
A. $180,000 higher
B. $320,000 higher
C. $320,000 lower
D. $180,000 lower
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-20
86. Leesburg Bags produces backpacks. The costs and prices for the backpacks follow
(Assume the same unit costs in all years):
Selling price $23.00 per backpack
Variable costs:
Production $11.00 per backpack
Selling $2.00 per backpack
Fixed costs:
Production $900,000 per year
Selling and administrative $540,000 per year
Leesburg Bags produced 250,000 backpacks for the year and sold 200,000. There was no
beginning inventory, and costs throughout the year were stable. What would be the
difference in income between variable costing income and full costing income if the
company had produced 215,000 backpacks instead of 250,000?
A. $62,791
B. $54,000
C. $46,400
D. $77,400
87. WebFlicks is an online DVD company that produces its own DVD copies of first-run movies
that it sells for $8.00 each. The following information is available (Assume the same unit
costs in all years):
Variable costs:
Product royalty fees $3.30 per DVD
DVD production $1.20 per DVD
Selling and admin costs $0.80 per DVD
Fixed costs:
Production $128,000 per month
Selling and administration $130,000 per month
During June, 160,000 DVDs were produced and 144,000 were sold. There were 17,000
DVDs in beginning inventory. How much is net income per month under variable costing?
A. $143,600
B. $130,800
C. $130,640
D. None of these answer choices are correct.