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Exam 6: Variable Costing and Analysis

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Question 51

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Given the following data, total product cost per unit under absorption costing will be greater than total product cost per unit under variable costing.

A) True
B) False

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Question 52

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During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $250,000. The company produced 25,000 units, and sold 20,000 units, leaving 5,000 units in inventory at year-end. Income calculated under variable costing is determined to be $315,000. How much income is reported under absorption costing?

A) $315,000
B) $265,000
C) $565,000
D) $365,000

E) B) and D)
F) B) and C)

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Question 53

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Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative (VSA) Variable manufacturing overhead (VOH) Fixed selling and administrative (FSA) Fixed manufacturing overhead (FOH)

Absorption costing is usually used for internal management purposes, and variable costing is usually used for external reporting purposes.

Sales less total variable costs equals manufacturing margin.

Given the following data, total product cost per unit under variable costing will be greater than total product cost under absorption costing.

Contribution margin is the excess of sales over total variable costs.

Reporting contribution margin by market segment is useful in assessing the profitability of each segment.

The bottom line of a contribution margin report is net income.

Income under absorption costing will always be different than income under variable costing.

Swisher, Incorporated reports the following annual cost data for its single product: This product is normally sold for $48 per unit. If Swisher increases its production to 50,000 units, while sales remain at the current 30,000 unit level, by how much would the company's income increase or decrease under absorption costing?

Under variable costing, product costs consist of direct labor, direct materials, and variable overhead.

What costs are treated as product costs under the variable costing method?

Swola Company reports the following annual cost data for its single product. This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's income increase or decrease under variable costing?

Income ________ when there is zero beginning inventory and all inventory units produced are sold.

Using absorption costing, which of the following manufacturing costs are assigned to products?

Information presented in a variable costing format can assist management when making short-term pricing decisions.

Which of the following statements is true regarding absorption costing?

Absorption costing is required under GAAP.

A company is currently operating at 65% capacity producing 12,000 units. Cost information relating to this current production is shown in the following table: The company has been approached by a customer with a request for a special order for 2,000 units. What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?