Chapter 5 Variable Costing
5-21
88. 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 full costing?
A. $143,600
B. $130,640
C. $130,800
D. None of these answer choices are correct.
89. 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 inventory at the end of the month under variable
costing?
A. $72,000
B. $148,500
C. $174,900
D. $84,800
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-22
90. 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 inventory at the end of the month under full
costing?
A. $72,000
B. $148,500
C. $174,900
D. $84,800
91. Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for
2017:
Selling price $15.00 per t-shirt
Variable costs:
Production (manufacturing costs) $3.00 per t-shirt
Selling & administration $1.00 per t-shirt
Fixed costs:
Production (manufacturing costs) $1,000,000 per year
Selling & administration $2,000,000 per year
During 2017, the company produced 400,000 t-shirts and sold 350,000 of them. Assume
that there was no beginning inventory. How much is the net income under variable costing?
A. $975,000
B. $1,400,000
C. $850,000
D. $2,250,000
92. Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for
2017:
Selling price $15.00 per t-shirt
Variable costs:
Production (manufacturing costs) $3.00 per t-shirt
Selling & administration $1.00 per t-shirt
Fixed costs:
Production (manufacturing costs) $1,000,000 per year
Selling & administration $2,000,000 per year
During 2017, the company produced 400,000 t-shirts and sold 350,000 of them. Assume
that there was no beginning inventory. How much is the net income under full costing?
A. $975,000
B. $1,400,000
C. $850,000
D. $2,250,000
Chapter 5 Variable Costing
5-23
93. Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for
2017:
Selling price $15.00 per t-shirt
Variable costs:
Production (manufacturing costs) $3.00 per t-shirt
Selling & administration $1.00 per t-shirt
Fixed costs:
Production (manufacturing costs) $1,000,000 per year
Selling & administration $2,000,000 per year
During 2017, the company produced 400,000 t-shirts and sold 350,000 of them. Assume
that there was no beginning inventory. How much is the inventory under variable costing at
December 31, 2017?
A. $150,000
B. $275,000
C. $200,000
D. $325,000
94. Aerotrino produces and sells popular t-shirts. Following is information about its t-shirts for
2017:
Selling price $15.00 per t-shirt
Variable costs:
Production (manufacturing costs) $3.00 per t-shirt
Selling & administration $1.00 per t-shirt
Fixed costs:
Production (manufacturing costs) $1,000,000 per year
Selling & administration $2,000,000 per year
During 2017, the company produced 400,000 t-shirts and sold 350,000 of them. Assume
that there was no beginning inventory. How much is the inventory under full costing at
December 31, 2017?
A. $150,000
B. $275,000
C. $200,000
D. $325,000
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-24
95. Brislin Gifts makes ceramic mugs and has the following amounts for 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per month
Fixed selling and administrative cost $60,000 per month
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 44,000 46,000
Inventory at January 1, 2017 consisted of 1,000 mugs. How much is net income for
January using variable costing?
A. $89,600
B. $77,600
C. $67,480
D. None of these answer choices are correct.
96. Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per month
Fixed selling and administrative cost $60,000 per month
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 50,000 45,000
Inventory at January 1, 2017 consisted of 1,000 mugs. How much is net income for
February using variable costing?
A. $70,500
B. $83,000
C. $183,000
D. None of these answer choices are correct.
Chapter 5 Variable Costing
5-25
97. Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per month
Fixed selling and administrative cost $60,000 per month
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 50,000 45,000
Inventory at January 1, 2017 consisted of 1,000 mugs. During which months will ending
inventory be the same if variable costing is used?
A. January and February
B. February and March
C. January and March
D. No two months would have the same ending inventory
98. Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per month
Fixed selling and administrative cost $60,000 per month
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 50,000 45,000
Inventory at January 1, 2017 consisted of 1,000 mugs. Which two months would have the
same net income under full costing?
A. January and February
B. February and March
C. January and March
D. No two months would have the same net income.
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-26
99. Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per year
Fixed selling and administrative cost $60,000 per year
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 50,000 45,000
Inventory at January 1, 2017 consisted of 1,000 mugs. How many units will remain in
inventory at the end of February?
A. 2,000
B. 0
C. 7,000
D. 6,000
100. Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per year
Fixed selling and administrative cost $60,000 per year
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 50,000 45,000
Inventory at January 1, 2017 consisted of 1,000 mugs. How much is the inventory cost per
unit under full costing during March?
A. $4.50
B. $4.00
C. $2.50
D. $5.10
Chapter 5 Variable Costing
5-27
101. Brislin Gifts makes ceramic mugs and has the following amounts during 2017 (Assume the
same unit costs in all years):
Selling price $9.00 per mug
Variable production cost $2.50 per mug
Variable selling cost $1.10 per mug
Fixed production cost $100,000 per year
Fixed selling and administrative cost $60,000 per year
Production and sales in units for the first three months of 2017 are as follows:
Year Production Sales
January 50,000 44,000
February 40,000 45,000
March 50,000 45,000
Inventory at January 1, 2017 consisted of 1,000 mugs. How much is the inventory cost per
unit under variable costing during March?
A. $4.50
B. $3.60
C. $2.50
D. $5.60
102. A company with fixed manufacturing costs of $500,000 produces 100,000 units in 2017 and
125,000 units in 2015. The company sells 90,000 units each in both years. Other costs and
selling price are unchanged for 2017 and 2018. Assume that there was no beginning
inventory in 2017. Which of the following is true?
A. Variable costing income will be greater in 2017 than in 2018.
B. The dollar amount of ending inventory will be greater in 2017 than in 2018.
C. Variable costing income will be the same in 2018 and 2017.
D. All of these answer choices are correct.
103. Zintec has fixed manufacturing costs of $400,000 and produces 10,000 and sells 8,000
wagons during the year. There is no beginning inventory. Which of the following
conclusions can be drawn?
A. Variable costing income will be $80,000 higher than full costing income.
B. Full costing income will be $80,000 higher than variable costing income.
C. Variable and full costing income will be the same.
D. There is not enough information to draw a conclusion.
104. Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs
involved in production are:
Direct material per unit $ 20
Direct labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year 148,500
In addition, the company has fixed selling and administrative costs of $150,000 per year.
During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.
There was no beginning inventory. What is the value of ending inventory using full costing?
A. $679,500
B. $630,000
C. $652,500
D. $780,000
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-28
105. Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs
involved in production are:
Direct material per unit $ 20
Direct labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year 148,500
In addition, the company has fixed selling and administrative costs of $150,000 per year.
During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.
There was no beginning inventory. What is the value of ending inventory using variable
costing?
A. $679,500
B. $630,000
C. $652,500
D. $780,000
106. Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs
involved in production are:
Direct material per unit $ 20
Direct labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year 148,500
In addition, the company has fixed selling and administrative costs of $150,000 per year.
During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.
There was no beginning inventory. How much is the cost of goods sold using full costing?
A. $1,359,000
B. $1,260,000
C. $2,038,500
D. $1,408,500
107. Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs
involved in production are:
Direct material per unit $ 20
Direct labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year 148,500
In addition, the company has fixed selling and administrative costs of $150,000 per year.
During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.
There was no beginning inventory. How much is net income using full costing?
A. $1,641,000
B. $1,590,000
C. $1,441,500
D. $1,491,000
Chapter 5 Variable Costing
5-29
108. Boulder Blowers produces snow blowers. The selling price per snow blower is $100. Costs
involved in production are:
Direct material per unit $ 20
Direct labor per unit 12
Variable manufacturing overhead per unit 10
Fixed manufacturing overhead per year 148,500
In addition, the company has fixed selling and administrative costs of $150,000 per year.
During the year, Boulder produces 45,000 snow blowers and sells 30,000 snow blowers.
Beginning inventory consists of no units. How much fixed manufacturing overhead is in
ending inventory under full costing?
A. $0
B. $49,500
C. $148,500
D. $99,000
109. The following information relates to Winslee Widgets during the company’s first year of
operations:
Units produced 11,000
Units sold 10,000
Units in ending inventory 1,000
Fixed manufacturing overhead $220,000
How much fixed manufacturing overhead will be expensed during the year using full
costing?
A. $220,000
B. $20,000
C. $200,000
D. $0
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-30
EXERCISES
110. Arctic AC Company is a small manufacturer of window air conditioners. There were 65
units in beginning inventory. The units sell for $180 each. In 2017, the company produced
1,000 units and sold 940 units. Beginning inventory was zero. Below is the variable costing
income statements for 2017:
Arctic AC Company
Variable Costing Income Statement
For the Year Ending December 31, 2017
Sales $169,200
Less variable costs:
Variable cost of goods sold $26,320
Variable selling expense 12,220 38,540
Contribution margin 130,660
Less fixed costs:
Fixed manufacturing expense 21,000
Fixed selling expense 6,580
Fixed administrative expense 4,700 32,280
Net income $98,380
a. How much net income will be reported under full costing?
b. Reconcile the difference in profit between the two income amounts.
Answer
Chapter 5 Variable Costing
5-31
111. The following information is available for Trailblazer, a manufacturer of four-wheel all–
terrain vehicles:
2017 2018
Vehicles produced 20,000 16,000
Vehicles sold 18,000 18,000
Selling price per unit $8,000 $8,000
Direct material per unit $1,600 $1,600
Direct labor per unit $3,000 $3,000
Variable manufacturing overhead per unit $600 $600
Fixed manufacturing overhead per year $4,800,000 $4,800,000
Fixed selling and administrative expense per year $3,000,000 $3,000,000
Beginning inventory contained zero units. In the company’s second year, the company
needed to get rid of excess inventory (the extra units produced but not sold in 2017), so it
cut back production to 16,000 units.
a. Calculate profit for both years using variable costing.
b. How much is reported as ending inventory when using variable costing for each
year?
c. Does variable costing profit present a more realistic view of performance during the
two years? Explain.
Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
5-32
112. Nader, Inc. produces e-readers that it sells for $80 each. Costs involved in production are:
Direct material $11 per unit
Direct labor 15 per unit
Variable manufacturing overhead 12 per unit
Fixed manufacturing overhead per year $448,000
In addition, the company has selling and administrative costs:
Fixed selling costs per year $175,000
Fixed administrative costs per year 75,000
Variable selling and administrative costs per year $6 per unit
During the year, Nader produced 28,000 readers and sold 29,400. Beginning inventory
totaled 1,800 units. Assume the same unit costs in all years. What is the value of ending
inventory using variable costing?
113. Nader, Inc. produces e-readers that it sells for $80 each. Costs involved in production are:
Direct material $11 per unit
Direct labor 15 per unit
Variable manufacturing overhead 12 per unit
Fixed manufacturing overhead per year $448,000
In addition, the company has selling and administrative costs:
Fixed selling costs per year $175,000
Fixed administrative costs per year 75,000
Variable selling and administrative costs per year $6 per unit
During the year, Nader produced 28,000 readers and sold 29,400. Beginning inventory
totaled 1,800 units. Assume the same unit costs in all years. How much is net income using
variable costing?