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CHAPTER 20(5): VARIABLE COSTING FOR MANAGEMENT ANALYSIS
1.
In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and
variable
costing.
a.
True
b.
False
2.
In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.
a.
True
b.
False
3.
Fixed factory overhead costs are included as part of the cost of products manufactured under the
absorption
costing concept.
a.
True
b.
False
4.
Under absorption costing, the cost of finished goods includes direct materials, direct labor, and all factory overhead.
a.
True
b.
False
5.
Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable
factory
overhead.
a.
True
b.
False
6.
In variable costing, the cost of products manufactured is composed of only those manufacturing costs that
increase
or decrease as the volume of production rises or falls.
a.
True
b.
False
7.
In variable costing, fixed costs do not become part of the cost of goods manufactured, but are considered
an
expense of the period.
a.
True
b.
False
8.
Variable costing is also known as direct costing.
a.
True
b.
False
9.
Property taxes on a factory building would be included as part of the cost of products manufactured under
the
absorption costing concept.
a.
True
b.
False
10.
The taxes on the factory superintendent's salary would be included as part of the cost of products manufactured
under the variable costing concept.
a.
True
b.
False
11.
The factory superintendent's salary would be included as part of the cost of products manufactured under the
absorption costing concept.
a.
True
b.
False
12.
Electricity purchased to operate factory machinery would be included as part of the cost of products
manufactured
under the absorption costing concept.
a.
True
b.
False
13.
The absorption costing income statement does not distinguish between variable and fixed costs.
a.
True
b.
False
14.
In the absorption costing income statement, deduction of the cost of goods sold from sales yields gross profit.
a.
True
b.
False
15.
In the absorption costing income statement, deduction of the cost of goods sold from sales yields
contribution
margin.
a.
True
b.
False
16.
In the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit.
a.
True
b.
False
17.
On the variable costing income statement, deduction of the variable cost of goods sold from sales yields
gross
profit.
a.
True
b.
False
18.
On the variable costing income statement, deduction of the variable cost of goods sold from sales
yields
manufacturing margin.
a.
True
b.
False
19.
On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.
a.
True
b.
False
20.
On the variable costing income statement, variable selling and administrative expenses are deducted
from
manufacturing margin to yield contribution margin.
a.
True
b.
False
21.
On the variable costing income statement, variable costs are deducted from contribution margin to
yield
manufacturing margin.
a.
True
b.
False
22.
On the variable costing income statement, the amounts representing the difference between the contribution
margin
and income from operations is the fixed manufacturing costs and fixed selling and administrative
expenses.
a.
True
b.
False
23.
The contribution margin and the manufacturing margin are usually equal.
a.
True
b.
False
24.
For a period during which the quantity of inventory at the end was larger than that at the beginning, income
from
operations reported under variable costing will be larger than income from operations reported under
absorption
costing.
a.
True
b.
False
25.
For a period during which the quantity of inventory at the end was larger than that at the beginning, income
from
operations reported under variable costing will be smaller than income from operations reported under
absorption
costing.
a.
True
b.
False
26.
For an accounting period during which the quantity of inventory at the end was smaller than the quantity at
the
beginning, income from operations reported under variable costing will be larger than income from
operations
reported under absorption costing.
a.
True
b.
False
27.
For a period during which the quantity of inventory at the end was smaller than that at the beginning, income
from
operations reported under variable costing will be smaller than income from operations reported under
absorption
costing.
a.
True
b.
False
28.
For a period during which the quantity of inventory at the end equals the inventory at the beginning, income
from
operations reported under variable costing will be smaller than income from operations reported under
absorption
costing.
a.
True
b.
False
29.
For a period during which the quantity of inventory at the end equals the inventory at the beginning, income
from
operations reported under variable costing will equal income from operations reported under absorption
costing.
a.
True
b.
False
30.
For a period during which the quantity of product manufactured exceeded the quantity sold, income from
operations
reported under absorption costing will be smaller than income from operations reported under variable
costing.
a.
True
b.
False
31.
For a period during which the quantity of product manufactured exceeded the quantity sold, income from
operations
reported under absorption costing will be larger than income from operations reported under variable
costing.
a.
True
b.
False
32.
For a period during which the quantity of product manufactured was less than the quantity sold, income from
operations reported under absorption costing will be larger than income from operations reported under
variable
costing.
a.
True
b.
False
33.
For a period during which the quantity of product manufactured was less than the quantity sold, income from
operations reported under absorption costing will be smaller than income from operations reported under
variable
costing.
a.
True
b.
False
34.
For a period during which the quantity of product manufactured equals the quantity sold, income from
operations
reported under absorption costing will equal the income from operations reported under variable
costing.
a.
True
b.
False
35.
For a period during which the quantity of product manufactured equals the quantity sold, income from
operations
reported under absorption costing will be smaller than the income from operations reported under
variable costing.
a.
True
b.
False
36.
Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and
production,
directly affect the amount of income from operations reported under absorption costing.
a.
True
b.
False
37.
Under absorption costing, the amount of income reported from operations can be increased by producing more
units
than are sold.
a.
True
b.
False
38.
Under absorption costing, increases or decreases in income from operations due to changes in inventory
levels
could be misinterpreted to be the result of operating efficiencies or inefficiencies.
a.
True
b.
False
39.
Management may use both absorption and variable costing methods for analyzing a particular product.
a.
True
b.
False
40.
Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.
a.
True
b.
False
41.
Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.
a.
True
b.
False
42.
In the short run, the selling price of a product should normally not be less than the variable costs and expenses
of
making and selling it.
a.
True
b.
False
43.
In the long run, for a business to remain in operation, the revenues from products sold should normally cover
all
costs and expenses and provide a reasonable income.
a.
True
b.
False
44.
For short-run production planning, information in the absorption costing format is more useful to management
than is
information in the variable costing format.
a.
True
b.
False
45.
For short-run production planning, information in the variable costing format is more useful to management than
is
information in the absorption costing concept format.
a.
True
b.
False
46.
Sales mix is generally defined as the relative distribution of sales among the various products sold.
a.
True
b.
False
47.
If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is
profitable to
increase the sales of that product with the lowest contribution margin.
a.
True
b.
False
48.
If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is
profitable to
increase the sales of that product with the highest contribution margin.
a.
True
b.
False
49.
The contribution margin ratio is computed as contribution margin divided by sales.
a.
True
b.
False
50.
In evaluating the performance of salespersons, the salesperson with the highest level of sales should be
evaluated
as the best performer.
a.
True
b.
False
51.
Companies prepare contribution margin reports by market segments and product segments because
products
contribute to profitability in various ways.
a.
True
b.
False
52.
Ford’s Expedition sport utility vehicle is its most profitable model. Therefore, Ford need not promote its Expedition
model anymore.
a.
True
b.
False
53.
The systematic examination of differences between planned and actual contribution margins is termed
contribution
margin analysis.
a.
True
b.
False
54.
In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in
unit
sales price or cost, is termed the quantity factor.
a.
True
b.
False
55.
In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in
unit
sales price or cost, is termed the unit price or unit cost factor.
a.
True
b.
False
56.
In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units
sold
is termed the unit price or unit cost factor.
a.
True
b.
False
57.
In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units
sold
is termed the quantity factor.
a.
True
b.
False
58.
In contribution margin analysis, the quantity factor is computed as the difference between actual quantity sold
and
the planned quantity sold, multiplied by the planned unit sales price or unit cost.
a.
True
b.
False
59.
In contribution margin analysis, the unit price or unit cost factor is computed as the difference between
actual
quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.
a.
True
b.
False
60.
In contribution margin analysis, the unit price or unit cost factor is computed as the difference between the
actual
unit price or unit cost and the planned unit price or unit cost, multiplied by the actual quantity sold.
a.
True
b.
False
