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Exam 5: Variable Costing for Management Analysis

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Question 1

True/False

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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

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Question 2

Multiple Choice

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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

E) All of the above
F) None of the above

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B

Question 3

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Companies prepare contribution margin reports by market segments and product segments because products contribute to profitability in various ways.

The relative distribution of sales among various products sold is referred to as the:

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.

The beginning inventory is 10,000 units. All of the units manufactured during the period and 8,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and variable costs are $300 per unit. Determine (a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption income from operations.

In the variable costing income statement, deduction of variable selling and administrative expenses from manufacturing margin yields:

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the contribution margin that would be reported on the variable costing income statement?

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

The contribution margin ratio is computed as contribution margin divided by sales.

Which of the following causes he difference between the planned and actual contribution margin?

Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales were 12,000 units. Determine (a) whether variable cost income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption costing income from operations.

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.

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:

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 business operated at 100% of capacity during its first month and incurred the following costs: 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?

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: What would be the effect on income from operations if variable costing is used rather than absorption costing?

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 variable cost of goods sold is:

On August 31, the end of the first year of operations, during which 18,000 units were manufactured and 13,500 units were sold, Olympic Inc. prepared the following income statement based on the variable costing concept:

A business operated at 100% of capacity during its first month and incurred the following costs: 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?