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Chapter 20(5): Variable Costing for Management Analysis
61.
A change in the amount of sales can be due to either a change in the units sold or a change in price or both.
a.
True
b.
False
62.
Contribution margin reporting and analysis is appropriate only for manufacturing firms, not for service firms.
a.
True
b.
False
63.
Service firms can only have one activity base for analyzing changes in costs.
a.
True
b.
False
64.
In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the
changes in various activities.
a.
True
b.
False
65.
Managers in service firms do not find contribution margin analysis reports useful because their firms do not
sell
inventory.
a.
True
b.
False
66.
What term is commonly used to describe the concept whereby the cost of manufactured products is composed of
direct materials cost, direct labor cost, and all factory overhead cost?
a.
Standard costing
b.
Variable costing
c.
Absorption costing
d.
Marginal costing
67.
What term is commonly used to describe the concept whereby the cost of manufactured products is composed of
direct materials cost, direct labor cost, and variable factory overhead cost?
a.
Absorption costing
b.
Differential costing
c.
Standard costing
d.
Variable costing
68.
Another name for variable costing is:
a.
indirect costing
b.
process costing
c.
direct costing
d.
differential costing
69.
Under absorption costing, which of the following costs would not be included in finished goods inventory?
a.
direct labor cost
b.
direct materials cost
c.
variable and fixed factory overhead cost
d.
variable and fixed selling and administrative expenses
70.
Under absorption costing, which of the following costs would not be included in finished goods inventory?
a.
hourly wages of assembly worker
b.
straight-line depreciation on factory equipment
c.
overtime wages paid to factory workers
d.
the salaries for salespeople
71.
Under variable costing, which of the following costs would not be included in finished goods inventory?
a.
direct labor cost
b.
direct materials cost
c.
variable factory overhead cost
d.
fixed factory overhead cost
72.
Under variable costing, which of the following costs would be included in finished goods inventory?
a.
neither variable nor fixed factory overhead cost
b.
both variable and fixed factory overhead cost
c.
only variable factory overhead cost
d.
only fixed factory overhead cost
73.
Under variable costing, which of the following costs would be included in finished goods inventory?
a.
salary of salesperson
b.
salary of vice-president of finance
c.
wages of carpenters in a furniture factory
d.
straight-line depreciation on factory equipment
74.
Under variable costing, which of the following costs would not be included in finished goods inventory?
a.
wages of machine operator
b.
steel costs for a machine tool manufacturer
c.
salary of factory supervisor
d.
electricity used by factory machinery
75.
Which of the following would be included in the cost of a product manufactured according to absorption costing?
a.
advertising expense
b.
sales salaries
c.
depreciation expense on factory building
d.
office supplies costs
76.
Which of the following would be included in the cost of a product manufactured according to variable costing?
a.
sales commissions
b.
office supply costs
c.
interest expense
d.
direct materials
77.
On the variable costing income statement, the figure representing the difference between manufacturing
margin
and contribution margin is the:
a.
fixed manufacturing costs
b.
variable cost of goods sold
c.
fixed selling and administrative expenses
d.
variable selling and administrative expenses
78.
In the variable costing income statement, deduction of variable selling and administrative expenses
from
manufacturing margin yields:
a.
differential margin
b.
contribution margin
c.
gross profit
d.
marginal expenses
79.
The amount of income under absorption costing will equal the amount of income under variable costing when
units
manufactured:
a.
exceed units sold
b.
equal units sold
c.
are less than units sold
d.
are equal to or greater than units sold
80.
The amount of income under absorption costing will be less than the amount of income under variable costing
when
units manufactured:
a.
exceed units sold
b.
equal units sold
c.
are less than units sold
d.
are equal to or greater than units sold
81.
Which of the following statements is correct using the direct costing concept?
a.
All manufacturing costs are included in the calculation of cost of goods manufactured.
b.
Only fixed costs are included in the calculation of cost of goods manufactured while variable costs
are
considered period costs.
c.
Only variable manufacturing costs are included in the calculation of cost of goods manufactured while
fixed
costs are considered period costs.
d.
All manufacturing costs are considered period costs.
82.
The amount of income under absorption costing will be more than the amount of income under variable
costing
when units manufactured:
a.
exceed units sold
b.
equal units sold
c.
are less than units sold
d.
are equal to or greater than units sold
83.
The level of inventory of a manufactured product has increased by 7,000 units during a period. The following
data
are also available:
Variable
Fixed
Unit manufacturing costs of the period
$12.00
$6.00
Unit operating expenses of the period
4.00
1.50
What would be the effect on income from operations if absorption costing is used rather than variable costing?
a.
$42,000 decrease
b.
$42,000 increase
c.
$52,500 increase
d.
$52,500 decrease
84.
The level of inventory of a manufactured product has increased by 8,000 units during a period. The following
data
are also available:
Variable
Fixed
Unit manufacturing costs of the period
$24.00
$10.00
Unit operating expenses of the period
8.00
3.00
What would be the effect on income from operations if variable costing is used rather than absorption costing?
a.
$80,000 decrease
b.
$80,000 increase
c.
$104,000 decrease
d.
$104,000 increase
85.
S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the
manufactured
product remained unchanged. The manufacturing costs were as follows:
Variable
Fixed
Unit manufacturing costs of the period
$11.00
$7.00
Unit operating expenses of the period
3.00
2.50
Which of the following statements is true?
a.
Net income will be the same under both variable and absorption costing.
b.
Net income under variable costing will be $45,000 less than net income under absorption costing
c.
Net income under absorption costing will be $40,000 more than under variable costing.
d.
The difference in net income cannot be determined.
86.
The level of inventory of a manufactured product has increased by 8,000 units during a period. The following
data
are also available:
Variable
Fixed
Unit manufacturing costs of the period
$24.00
$10.00
Unit operating expenses of the period
8.00
3.00
What would be the effect on income from operations if absorption costing is used rather than variable costing?
a.
$80,000 decrease
b.
$80,000 increase
c.
$104,000 increase
d.
$104,000 decrease
87.
The level of inventory of a manufactured product has increased by 5,000 units during a period. The following
data
are also available:
Variable
Fixed
Unit manufacturing costs of the period
$24.00
$10.00
Unit operating expenses of the period
8.00
3.00
What would be the effect on income from operations if variable costing is used rather than absorption costing?
a.
$50,000 decrease
b.
$50,000 increase
c.
$65,000 increase
d.
$65,000 decrease
88.
The level of inventory of a manufactured product has increased by 4,000 units during a period. The following
data
are also available:
Variable
Fixed
Unit manufacturing costs of the period
$22.00
$11.00
Unit operating expenses of the period
7.00
5.00
What would be the effect on income from operations if absorption costing is used rather than variable costing?
a.
$44,000 decrease
b.
$44,000 increase
c.
$64,000 increase
d.
$64,000 decrease
89.
A business operated at 100% of capacity during its first month and incurred the following
costs:
Production costs (20,000 units):
Direct materials
$180,000
Direct labor
240,000
Variable factory overhead
280,000
Fixed factory overhead
100,000
$800,000
Operating expenses:
Variable operating expenses
$130,000
Fixed operating expenses
50,000
180,000
If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on
the
variable costing balance sheet?
a. $64,000
b. $56,000
c. $66,400
d. $78,400
90.
A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (10,000 units):
Direct materials
$ 80,000
Direct labor
120,000
Variable factory overhead
140,000
Fixed factory overhead
40,000
$380,000
Operating expenses:
Variable operating expenses
$ 65,000
Fixed operating expenses
25,000
90,000
If 1,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on
the
absorption costing balance sheet?
a. $38,000
b. $40,500
c. $34,000
d. $47,000
91.
A business operated at 100% of capacity during its first month and incurred the following
costs:
Production costs (20,000 units):
Direct materials
$180,000
Direct labor
240,000
Variable factory overhead
280,000
Fixed factory overhead
100,000
$800,000
Operating expenses:
Variable operating expenses
$130,000
Fixed operating expenses
50,000
180,000
If 1,500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on
the
variable costing balance sheet?
a. $62,500
b. $73,500
c. $60,000
d. $52,500
92.
A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (10,000 units):
Direct materials
$ 80,000
Direct labor
120,000
Variable factory overhead
140,000
Fixed factory overhead
40,000
$380,000
Operating expenses:
Variable operating expenses
$ 65,000
Fixed operating expenses
25,000
90,000
If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the
absorption costing balance sheet?
a. $24,300
b. $28,200
c. $22,800
d. $34,000
93.
A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (2,500 units):
Direct materials
$42,500
Direct labor
85,000
Variable factory overhead
47,500
Fixed factory overhead
12,500
$187,500
Operating expenses:
Variable operating expenses
$15,000
Fixed operating expenses
4,500
19,500
If 75 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the
absorption costing balance sheet?
a. $5,625
b. $5,250
c. $5,760
d. $6,210
94.
A business operated at 100% of capacity during its first month and incurred the following
costs:
Production costs (10,000 units):
Direct materials
$170,000
Direct labor
360,000
Variable factory overhead
190,000
Fixed factory overhead
50,000
$770,000
Operating expenses:
Variable operating expenses
$ 60,000
Fixed operating expenses
18,000
78,000
If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the
variable costing balance sheet?
a. $41,500
b. $36,000
c. $42,800
d. $38,500
95.
A business operated at 100% of capacity during its first month and incurred the following costs:
Production costs (10,000 units):
Direct materials
$140,000
Direct labor
40,000
Variable factory overhead
20,000
Fixed factory overhead
4,000
$204,000
Operating expenses:
Variable operating expenses
$ 34,000
Fixed operating expenses
2,000
36,000
If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be
the
amount of income from operations reported on the variable costing income statement?
a. $100,800
b. $100,000
c. $114,800
d. $140,000
96.
A business operated at 100% of capacity during its first month and incurred the following
costs:
Production costs (5,000 units):
Direct materials
$70,000
Direct labor
20,000
Variable factory overhead
10,000
Fixed factory overhead
2,000
$102,000
Operating expenses:
Variable operating expenses
$17,000
Fixed operating expenses
1,000
18,000
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be
the
amount of income from operations reported on the absorption costing income statement?
a. $50,400
b. $70,000
c. $52,000
d. $68,400
97.
A business operated at 100% of capacity during its first month and incurred the following
costs:
Production costs (10,000 units):
Direct materials
$140,000
Direct labor
40,000
Variable factory overhead
20,000
Fixed factory overhead
4,000
$204,000
Operating expenses:
Variable operating expenses
$ 34,000
Fixed operating expenses
2,000
36,000
If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what is the amount of
the manufacturing margin that would be reported on the variable costing income statement?
a. $104,000
b. $106,000
c. $140,000
d. not reported
98.
A business operated at 100% of capacity during its first month and incurred the following
costs:
Production costs (5,000 units):
Direct materials
$70,000
Direct labor
20,000
Variable factory overhead
10,000
Fixed factory overhead
2,000
$102,000
Operating expenses:
Variable operating expenses
$17,000
Fixed operating expenses
1,000
18,000
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of
the manufacturing margin that would be reported on the absorption costing income statement?
a. $50,000
b. $54,000
c. not reported
d. $70,000
