101. A business operated at 100% of capacity during its first month, with the following results:
Sales (90 units)
$90,000
Production costs (100 units):
Direct materials
$40,000
Direct labor
20,000
Variable factory overhead
2,000
Fixed factory overhead
7,000
69,000
Operating expenses:
Variable operating expenses
$ 8,000
Fixed operating expenses
1,000
9,000
What is the amount of the contribution margin that would be reported on the variable costing income statement?
102. A business operated at 100% of capacity during its first month, with the following results:
Sales (90 units)
$90,000
Production costs (100 units):
Direct materials
$40,000
Direct labor
20,000
Variable factory overhead
2,000
Fixed factory overhead
7,000
69,000
Operating expenses:
Variable operating expenses
$ 8,000
Fixed operating expenses
1,000
9,000
What is the amount of the income from operations that would be reported on the variable costing income statement?
103. A business operated at 100% of capacity during its first month, with the following results:
Sales (90 units)
$90,000
Production costs (100 units):
Direct materials
$40,000
Direct labor
20,000
Variable factory overhead
2,000
Fixed factory overhead
7,000
69,000
Operating expenses:
Variable operating expenses
$ 8,000
Fixed operating expenses
1,000
9,000
What is the amount of the income from operations that would be reported on the absorption costing income statement?
104. A business operated at 100% of capacity during its first month, with the following results:
Sales (90 units)
$90,000
Production costs (100 units):
Direct materials
$40,000
Direct labor
20,000
Variable factory overhead
2,000
Fixed factory overhead
7,000
69,000
Operating expenses:
Variable operating expenses
$ 8,000
Fixed operating expenses
1,000
9,000
What is the amount of the gross profit that would be reported on the absorption costing income statement?
105. Accountants prefer the variable costing method over absorption costing method for evaluating the
performance of a company because
106. Under which inventory costing method could increases or decreases in income from operations be
misinterpreted to be the result of operating efficiencies or inefficiencies?
107. It would be acceptable to have the selling price of a product just above the variable costs and expenses of
making and selling it in:
108. Costs that can be influenced by management at a specific level of management are called:
109. Which of the following is(are) reason(s) for easy identification and control of variable manufacturing costs
under the variable costing method?
110. Which of the following is not true when determining the selling price for a product?
111. Management will use both variable and absorption costing in all of the following activities except:
112. The relative distribution of sales among various products sold is referred to as the:
113. Management should focus its sales and production efforts on the product or products that will provide
114. The contribution margin ratio is computed as:
115. For a supervisor of a manufacturing department, which of the following costs is controllable?
116. Sales territory profitability analysis can determine profit differences between territories due to
117. Contribution margin reporting can be beneficial for analyzing, which of the following?
118. If sales totaled $200,000 for the current year (10,000 units at $20 each) and planned sales totaled $212,500
(12,500 units at $17 each), the effect of the unit price factor on the change in sales is a:
119. In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change
in unit sales price or unit cost, is referred to as the:
120. In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number of
units sold is referred to as the:
121. In contribution margin analysis, the quantity factor is computed as:
122. In contribution margin analysis, the unit price or unit cost factor is computed as:
123. If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the quantity factor on the
change in variable cost of goods sold is:
124. If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the unit cost factor on the
change in variable cost of goods sold is:
125. If variable selling and administrative expenses totaled $124,000 for the year (80,000 units at $1.55 each)
and the planned variable selling and administrative expenses totaled $136,500 (78,000 units at $1.75 each), the
effect of the quantity factor on the change in variable selling and administrative expenses is:
126. If 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 variable selling and administrative expenses is:
127. If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled $799,500
(78,000 units at $10.25 each), the effect of the unit price factor on the change in sales is:
128. If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled $799,500
(78,000 units at $10.25 each), the effect of the quantity factor on the change in sales is:
129. If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the
change in variable cost of goods sold is:
130. If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the unit cost factor on the
change in variable cost of goods sold is:
131. Which of the following causes he difference between the planned and actual contribution margin?
132. The systematic examination of the differences between planned and actual contribution margin is termed
the:
133. Edna’s Chocolates had planned to sell chocolate-covered strawberries for $3.00 each. Due to various
factors, the actual price was $2.75. Edna’s was able to sell 1,000 more strawberries than the anticipated 4,000.
What is (1) the quantity factor and (2) the price factor for sales?
134. On what effects does contribution margin analysis focus?
135. In which of the following types of firms would it be appropriate to prepare contribution margin reporting
and analysis?
136. Which of the following would not be an appropriate activity base for cost analysis in a service firm?
137. Philadelphia Company has the following information for March:
$450,000
240,000
70,000
52,000
35,000
Determine the March (a) manufacturing margin, (b) contribution margin, and (c) income from operations for Philadelphia Company.
138. Cades Company has the following information for March:
Sales
$500,000
Variable cost of goods sold
245,000
Fixed manufacturing costs
85,000
Variable selling and administrative expenses
56,000
Fixed selling and administrating expenses
50,000
Determine the March (a) manufacturing margin, (b) contribution margin, and (c) income from operations for Cades Company.
139. Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales
were 12,000 units. Determine (a) whether variable cost income from operations is less than or greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption costing
income from operations.
(a)
Variable costing income from operations is less than absorption cost income from operations.
(b)
$10,000 ($10 per unit ´ 1,000 units)
140. Fixed costs are $50 per unit and variable costs are $125 per unit. Production was 130,000 units, while
sales were 125,000 units. Determine (a) whether variable cost income from operations is less than or greater
than absorption costing income from operations, and (b) the difference in variable costing and absorption
costing income from operations.
141. The beginning inventory is 10,000 units. All of the units manufactured during the period and 8,000 units
of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and variable costs
are $300 per unit. Determine (a) whether variable costing income from operations is less than or greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption income
from operations.
142. The beginning inventory is 5,000 units. All of the units manufactured during the period and 3,000 units of
the beginning inventory were sold. The beginning inventory fixed costs are $25 per unit, and variable costs are
$55 per unit. Determine (a) whether variable costing income from operations is less than or greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption income
from operations.
143. Variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000 units. (a) How
much would absorption costing income from operations differ between a plan to produce 4,000 units and a plan
to produce 5,000 units? (b) How much would variable costing income from operations differ between the two
production plans?
144. If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000, what is
the manufacturing cost per unit if:
(a) 20,000 units are manufactured and the company uses the variable costing concept?
(b) 25,000 units are manufactured and the company uses the variable costing concept?
(c) 20,000 units are manufactured and the company uses the absorption costing concept?
(d) 25,000 units are manufactured and the company used the absorption costing concept?
145. The following data are for Trendy Fashion Apparel:
North
South
Sales volume (units):
Blouses
5,000
5,000
Skirts
4,000
8,000
Sales price per unit:
Blouses
$20.00
$22.00
Skirts
$18.00
$20.00
Variable cost per unit
Blouses
$ 7.00
$ 9.00
Skirts
$ 9.00
$11.00
Determine the contribution margin for (a) Skirts and (b) the South Region.
146. The actual price for a product was $50 per unit, while the planned price was $44 per unit. The volume
increased by 4,000 to 60,000 total units. Determine (a) the quantity factor and (b) the price factor for sales.
147. On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of
capacity during January. The following data summarized the results for January:
Units
Production
50,000
Sales ($18 per unit)
42,000
Inventory, January 31
8,000
Manufacturing costs:
Variable
$575,000
Fixed
80,000
Total
$655,000
Selling and administrative expenses:
Variable
$ 35,000
Fixed
10,500
Total
$ 45,500
(a)
Prepare an income statement using absorption costing.
(b)
Prepare an income statement using variable costing.
Sales
$756,000
Cost of goods sold:
Cost of goods manufactured
$655,000
Less inventory, January 31, 20—
104,800
Cost of goods sold
550,200
Gross profit
$205,800
Less selling and administrative expenses
45,500
Income from operations
$160,300
Sales
$756,000
Variable cost of goods sold:
Variable cost of goods manufactured
$575,000
Less inventory, January 31, 20—
92,000
Variable cost of goods sold
483,000
Manufacturing margin
$273,000
Variable selling and administrative expense
35,000
Contribution margin
$238,000
Fixed costs:
Fixed manufacturing costs
$ 80,000
148. On October 31, the end of the first month of operations, Morristown & Co. prepared the following income
statement based on absorption costing:
Morristown & Co.
Absorption Costing Income Statement
For Month Ended October 31, 20-
Sales (2,600 units)
$117,000
Cost of goods sold:
Cost of goods manufactured
$85,500
Less ending inventory (400 units)
11,400
Cost of goods sold
74,100
Gross profit
$ 42,900
Selling and administrative expenses
21,500
Income from operations
$ 21,400
If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement using
variable costing.
Morristown & Co.
For Month Ended October 31, 20-
Sales
$117,000
Variable cost of goods sold:
Variable cost of goods manufactured
$42,600
Less ending inventory
(400 units ´ $14.20)
5,680
Variable cost of goods sold
36,920
Manufacturing margin
$ 80,080
Variable selling and administrative expenses
14,600
Contribution margin
$ 65,480
Mixed costs:
Fixed manufacturing costs
$42,900
Fixed selling and administrative expenses
6,900
49,800
Income from operations
$ 15,680
$42,600 variable cost of goods manufactured
= $14.20
3,000 units manufactured
149. Presented below are the major categories or captions that would appear on an income statement prepared in
the variable costing format:
Contribution margin
Fixed costs
Income from operations
Manufacturing margin
Sales
Variable cost of goods sold
Variable selling and administrative expenses
(a)
Arrange the above captions in the proper order in accordance with the variable costing concept.
(b)
Which of the captions represents (1) the difference between sales and the total of all the variable costs and expenses and (2)
the remaining amount of revenue available for fixed manufacturing costs, fixed expenses, and net income?
Variable cost of goods sold
Manufacturing margin
Variable selling and administrative expenses
Fixed costs
Income from operations
(b)
(1)
Contribution margin
150. On August 31, the end of the first year of operations, during which 18,000 units were manufactured and
13,500 units were sold, Olympic Inc. prepared the following income statement based on the variable costing
concept:
Olympic Inc.
Variable Costing Income Statement
For Year Ended August 31, 20—
Sales
$297,000
Variable cost of goods sold:
Variable cost of goods manufactured
$288,000
Less ending inventory
72,000
Variable cost of goods sold
216,000
Manufacturing margin
$ 81,000
Variable selling and administrative expenses
40,500
Contribution margin
$ 40,500
Fixed costs:
Fixed manufacturing costs
$ 12,000
Fixed selling and administrative expenses
10,800
22,800
Income from operations
$ 17,700
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.
(a)
$16.00 ($288,000 total variable cost of goods manufactured/18,000 units manufactured.)
(b)
Unit variable cost of goods manufactured (a)
$16.00
Unit fixed cost of goods manufactured
($12,000/18,000 units manufactured)
.67
Unit cost
$16.67
151. Gyro Company manufactures Products T and W and is operating at full capacity. To manufacture Product
W requires three times the number of machine hours required for Product T. Market research indicates that
1,000 additional units of Product W could be sold. The contribution margin by unit of product is as follows:
Product T
Product W
Sales price
$300
$325
Variable cost of goods sold
235
250
Manufacturing margin
$ 65
$ 75
Variable selling and administrative expenses
25
10
Contribution margin
$ 40
$ 65
Calculate the increase or decrease in total contribution margin if 1,000 additional units of Product W are produced and sold.
Decrease in total contribution margin
$ (55,000)
152. Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis
report for the year ended December 31, 2012.
For Year Ended
December 31, 2012
Actual
Planned
Difference
Increase
(Decrease)
Sales
$312,000
$325,000
$(13,000)
Less:
Variable cost of goods sold
$169,200
$182,000
$(12,800)
Variable selling and administrative
expenses
32,400
39,000
(6,600)
Total
$201,600
$221,000
$(19,400)
Contribution margin
$110,400
$104,000
$ 6,400
Number of units sold
120,000
130,000
(10,000)
Per unit:
Sales price
$2.60
$2.50
.10
Variable cost of goods sold
1.41
1.40
.01
Variable selling and administrative
expenses
.27
.30
(.03)
Bruce Inc.
Contribution Margin Analysis
Planned contribution margin
$104,000
Effect of changes in sales
Sales quantity factor:
Decrease in number of units sold in 2012
(10,000)
Planned sales price in 2012
´ $2.50
$(25,000)
Price factor:
Increase in unit sales price in 2012
$ .10
Number of units sold in 2012
´ 120,000
12,000
Total effect of changes in sales
$(13,000)
Effect of changes in variable cost of
goods sold:
Quantity factor:
Decrease in number of units sold in 2012
10,000
Planned unit cost in 2012
´ $1.40
$14,000
Unit cost factor:
Increase in unit cost in 2012
$0.01
Number of units sold in 2012
´ 120,000
1,200
Total effect of changes in variable cost of goods sold
Effect of changes in selling and administrative expenses:
Quantity factor:
Decrease in number of units sold in 2012
(10,000)
Planned unit cost in 2012
´ $ 0.30
$ 3,000
Number of units sold in 2012
´ 120,000
3,600
6,600
153. The Excelsior Company has three salespersons. Average sales price per unit sold, average variable
manufacturing costs per unit, and number of units sold for each salesperson is shown below.
Commissions are according to the following schedule:
Total Sales
Percentage
$0 to 49,999
6%
$50,000 to $52,999
7%
Over $53,000
8%
Salesperson
Mary Q.
John A.
Susan B.
Avg. selling price per unit
$50.00
$65.00
$45.00
Avg. var. mfg. costs per unit
25.00
30.00
35.00
Number of units sold
1,000
750
1,200
Prepare a contribution by salesperson report.
Salesperson
Mary Q.
John A.
Susan B.
Total sales
$50,000
$48,750
$54,000
Variable mfg. cost
25,000
22,500
42,000
Manufacturing margin
$25,000
$26,250
$12,000
Commissions
3,500
2,925
4,320
Contribution margin per salesperson
$21,500
$23,325
$ 7,680
154. The Excelsior Company has three salespersons. Average sales price per unit sold, average variable
manufacturing costs per unit, and number of units sold for each salesperson is shown below.
Commissions are according to the following schedule:
Total Sales
Percentage
$0 to 49,999
6%
$50,000 to $52,999
7%
Over $53,000
8%
Salesperson
Mary Q.
John A.
Susan B.
Avg. selling price per unit
$50.00
$65.00
$45.00
Avg. var. mfg. costs per unit
25.00
30.00
35.00
Number of units sold
1,000
750
1,200
Prepare a contribution by salesperson report.
Salesperson
Mary Q.
John A.
Susan B.
Total sales
$50,000
$48,750
$54,000
Variable mfg. cost
25,000
22,500
42,000
Manufacturing margin
$25,000
$26,250
$12,000
Commissions
3,500
2,925
4,320
Contribution margin per salesperson
$21,500
$23,325
$ 7,680