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Exam 7: Variable Costing: a Tool for Management

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Question 21

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Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost. -Under variable costing, the company's net operating income for the year would be:

A) $60,000 higher than under absorption costing
B) $108,000 higher than under absorption costing
C) $108,000 lower than under absorption costing
D) $60,000 lower than under absorption costing

E) A) and B)
F) A) and C)

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Question 22

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A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the total period cost for the month under absorption costing?

A) $48,000
B) $275,100
C) $86,400
D) $188,700

E) A) and B)
F) A) and C)

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Question 23

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Which of the following statements is true?

Slovick Inc., which produces a single product, has provided the following data for its most recent month of operations: There were no beginning or ending inventories. -The unit product cost under variable costing was:

In a manufacturing company using absorption costing, the fixed costs associated with idle production capacity are commonly included as part of the product cost.

Qiu Company, which has only one product, has provided the following data concerning its most recent month of operations: Required: a. What is the unit product cost for the month under variable costing? b. Prepare a contribution format income statement for the month using variable costing. c. Without preparing an income statement, determine the absorption costing net operating income for the month. (Hint: Use the reconciliation method.)

Gallager Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the total period cost for the month under the variable costing approach?

Smolinski Corporation produces a single product and has the following cost structure: Required: Compute the unit product cost under absorption costing. Show your work!

Fowler Company manufactures a single product. Operating data for the company and its absorption costing income statements for the last two years are presented below: Variable manufacturing costs are $6 per unit. Fixed manufacturing overhead totals $72,000 in each year. This overhead is applied at the rate of $4 per unit. Variable selling and administrative expenses are $2 per unit sold. Required: a. What was the unit product cost in each year under variable costing? b. Prepare new income statements for each year using variable costing. c. Reconcile the absorption costing and variable costing net operating income for each year.

Eagen Corporation manufactures a variety of products. The following data pertain to the company's operations over the last two years: Required: a. Determine the absorption costing net operating income for last year. Show your work! b. Determine the absorption costing net operating income for this year. Show your work!

Elder Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the net operating income for the month under absorption costing?

Yoshihara Corporation produces a single product and has the following cost structure: The absorption costing unit product cost is:

What is the cause of the difference between absorption costing net operating income and variable costing net operating income?

Walsh Company produces a single product. Last year, the company manufactured 25,000 units and sold 22,000 units. Production costs were as follows: Sales totaled $440,000, variable selling and administrative expenses were $110,000, and fixed selling and administrative expenses were $45,000. There was no beginning inventory. Assume that direct labor is a variable cost. -Under absorption costing, the gross margin would be:

Caparros Corporation manufactures a variety of products. Variable costing net operating income was $62,800 last year and was $74,900 this year. Last year, ending inventory decreased by 3,300 units. This year, ending inventory increased by 1,900 units. Fixed manufacturing overhead cost is $7 per unit. -What was the absorption costing net operating income this year?

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the net operating income for the month under variable costing?

Erie Company manufactures a single product. Assume the following data for the year just completed: There were no units in inventory at the beginning of the year. During the year 30,000 units were produced and 25,000 units were sold. Each unit sells for $35. -The company's net operating income under variable costing would be:

Variable selling and administrative expenses are part of product costs under the variable costing approach.

Mafli Company, which has only one product, has provided the following data concerning its most recent month of operations: Required: a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare a contribution format income statement for the month using variable costing. d. Prepare an income statement for the month using absorption costing. e. Reconcile the variable costing and absorption costing net operating incomes for the month.

Gallager Company, which has only one product, has provided the following data concerning its most recent month of operations: -What is the total period cost for the month under the absorption costing approach?