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Chapter 20(5): Variable Costing for Management Analysis
99.
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 contribution margin that would be reported on the variable costing income statement?
a. $51,400
b. $52,000
c. $54,000
d. $53,000
100.
A business operated at 100% of capacity during its first month, with the following results:
Sales (160 units)
$160,000
Production costs (200 units):
Direct materials
$100,000
Direct labor
20,000
Variable factory overhead
10,000
Fixed factory overhead
4,000
134,000
Operating expenses:
Variable operating expenses
$ 12,000
Fixed operating expenses
2,000
14,000
What is the amount of the manufacturing margin that would be reported on the variable costing income
statement?
a. $30,000
b. $38,000
c. $56,000
d. $44,000
Chapter 20(5): Variable Costing for Management Analysis
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
101.
What is the amount of the contribution margin that would be reported on the variable costing income statement?
a. $34,200
b. $20,200
c. $29,700
d. $26,200
102.
What is the amount of the income from operations that would be reported on the variable costing income
statement?
a. $18,900
b. $18,200
c. $18,000
d. $21,000
103.
What is the amount of the income from operations that would be reported on the absorption costing income
statement?
a. $21,000
b. $18,900
c. $18,200
d. $27,900
104.
What is the amount of the gross profit that would be reported on the absorption costing income statement?
a. $21,000
b. $18,900
c. $27,900
d. $18,000
105.
Accountants prefer the variable costing method over absorption costing method for evaluating the performance of
a
company because
a.
by using the absorption costing method, income could appear to be higher by producing more inventory.
b.
by using the absorption costing method, income could appear to be lower by producing more inventory.
c.
by using the variable costing method, the cost of goods sold will be higher as more units are manufactured
and
sales remain the same.
d.
by using the variable costing method, all fixed and variable costs are included in the unit cost of the product
manufactured.
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?
a.
only variable costing
b.
only absorption costing
c.
both variable and absorption costing
d.
neither variable nor absorption costing
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:
a.
the long run
b.
the short run
c.
both the short run and long run
d.
neither in the short run nor the long run
108.
Costs that can be influenced by management at a specific level of management are called:
a.
direct costs.
b.
variable costs.
c.
noncontrollable costs.
d.
controllable costs.
109.
Which of the following is(are) reason(s) for easy identification and control of variable manufacturing costs
under
the variable costing method?
a.
variable and fixed costs are reported separately.
b.
variable costs can be controlled by the operating management.
c.
fixed costs, such as property insurance, are normally the responsibility of higher management not
the
operating management.
d.
All of the above are true.
110.
Management will use both variable and absorption costing in all of the following activities except:
a.
controlling costs
b.
product pricing
c.
production planning
d.
controlling inventory levels
111.
Which of the following is not true when determining the selling price for a product?
a.
Absorption costing should be used to determine routine pricing which includes both fixed and variable costs.
b.
As long as the selling price is set above the variable costs, the company will make a profit in short run.
c.
Variable costing is effective when determining short run decisions, but absorption costing is only used
for
long-term pricing policies.
d.
Both variable and absorption pricing plans should be considered, to include several pricing alternatives.
112.
For a supervisor of a manufacturing department, which of the following costs is controllable?
a.
direct materials
b.
insurance on factory building
c.
depreciation of factory building
d.
sales salaries
113.
The relative distribution of sales among various products sold is referred to as the:
a.
by-product mix
b.
joint product mix
c.
profit mix
d.
sales mix
114.
Management should focus its sales and production efforts on the product or products that will provide
a.
the highest sales revenue
b.
the lowest product costs
c.
the maximum contribution margin
d.
the lowest direct labor hours
115.
The contribution margin ratio is computed as:
a.
sales divided by contribution margin
b.
contribution margin divided by sales
c.
contribution margin divided by cost of sales
d.
contribution margin divided by variable cost of sales
116.
Contribution margin reporting can be beneficial for analyzing which of the following?
a.
sales personnel
b.
products
c.
sales territory
d.
all of the above
117.
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:
a.
$30,000 increase
b.
$12,500 increase
c.
$7,500 increase
d.
$30,000 decrease
118.
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:
a.
sales factor
b.
cost of goods sold factor
c.
quantity factor
d.
price factor
119.
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:
a.
sales factor
b.
cost of goods sold factor
c.
quantity factor
d.
unit price or unit cost factor
120.
In contribution margin analysis, the quantity factor is computed as:
a.
the increase or decrease in the number of units sold multiplied by the planned unit sales price or unit cost
b.
the increase or decrease in unit sales price or unit cost multiplied by the planned number of units to be sold
c.
the increase or decrease in the number of units sold multiplied by the actual unit sales price or unit cost
d.
the increase or decrease in the unit sales price or unit cost multiplied by the actual number of units sold
121.
In contribution margin analysis, the unit price or unit cost factor is computed as:
a.
the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by
the
planned quantity sold
b.
the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by
the
actual quantity sold
c.
the difference between the actual quantity sold and the planned quantity sold, multiplied by the planned
unit
sales price or unit cost
d.
the difference between the actual quantity sold and the planned quantity sold, multiplied by the actual
unit
sales price or unit cost
122.
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
contribution margin is:
a.
$5,000 decrease
b.
$5,000 increase
c.
$5,750 increase
d.
$5,750 decrease
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 unit cost factor on the change in
contribution margin is:
a.
$12,000 increase
b.
$5,750 decrease
c.
$12,000 decrease
d.
$5,750 increase
124.
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 contribution margin is:
a.
$3,000 increase
b.
$3,500 decrease
c.
$3,000 decrease
d.
$3,500 increase
125.
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 contribution margin is:
a.
$19,500 decrease
b.
$19,500 increase
c.
$20,000 decrease
d.
$20,000 increase
126.
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:
a.
$19,500 decrease
b.
$19,500 increase
c.
$20,000 decrease
d.
$20,000 increase
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 quantity factor on the change in sales is:
a.
$20,500 increase
b.
$20,000 decrease
c.
$20,500 decrease
d.
$20,000 increase
128.
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
contribution margin is:
a.
$10,800 decrease
b.
$10,800 increase
c.
$10,000 increase
d.
$10,000 decrease
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 unit cost factor on the change in
contribution margin is:
a.
$6,400 decrease
b.
$6,400 increase
c.
$7,200 increase
d.
$7,200 decrease
130.
Which of the following causes the difference between the planned and actual contribution margin?
a.
an increase or decrease in the amount of sales
b.
an increase in the amount of variable costs and expenses
c.
a decrease in the amount of variable costs and expenses
d.
all of the above
131.
The systematic examination of the differences between planned and actual contribution margin is
a.
gross profit analysis
b.
contribution margin analysis
c.
sales mix analysis
d.
volume variance analysis
132.
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?
a. (1) $3,000, (2) $(1,250)
b. (1) $3,000, (2) $(3,000)
c. (1) $1,250, (2) $3,000
d. (1) $(4,000) (2) $(3,000)
133.
On what effects does contribution margin analysis focus?
a.
the quantity factor
b.
the unit cost factor
c.
the unit sales price factor
d.
all of the above
134.
In which of the following types of firms would it be appropriate to prepare contribution margin reporting
and
analysis?
a.
boat manufacturing
b.
a chain of beauty salons
c.
home building
d.
all of the above
135.
Which of the following would not be an appropriate activity base for cost analysis in a service firm?
a.
lawns mowed
b.
inventory produced
c.
customers served
d.
haircuts given
