(Test Bank) James Madison University COB 24216e_GNB_CH06_TB-final-REVIEWED AND VERIFIED BY EXPERTS

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File: 16e_GNB_CH06_TB, Chapter 6, Variable Costing and Segment Reporting: Tools for Management True/False [QUESTION] 1. Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing. Answer: T Difficulty: 2 Medium Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 2. Absorption costing treats all manufacturing costs as product costs. Answer: T Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 3. Under variable costing, fixed manufacturing overhead is treated as a product cost. Answer: F Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 4. Under variable costing, all variable production costs are treated as product costs. Answer: T Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 5. Under variable costing, an increase in fixed manufacturing overhead will affect the unit product cost. Answer: FDifficulty: 2 Medium Learning Objective: 06-01 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 6. Under variable costing, only variable production costs are treated as product costs. Answer: T Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 7. Absorption costing treats all fixed costs as product costs. Answer: F Difficulty: 2 Medium Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 8. Variable costing is more compatible with cost-volume-profit analysis than is absorption costing. Answer: T Difficulty: 2 Medium Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 9. Under the absorption costing method, a company can increase profits simply by increasing the number of units produced. Answer: T Difficulty: 2 Medium Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN MeasurementFeedback: [QUESTION] 10. Net operating income computed using absorption costing will always be less than net operating income computed using variable costing. Answer: F Difficulty: 1 Easy Learning Objective: 06-02 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 11. Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when production volume exceeds sales volume. Answer: F Difficulty: 2 Medium Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 12. Variable costing net operating income is usually closer to the net cash flow of a period than is costing absorption net operating income. Answer: T Difficulty: 2 Medium Learning Objective: Other topics Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 13. When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs deferred in inventory under absorption costing should be deducted from variable costing net operating income to arrive at the absorption costing net operating income. Answer: F Difficulty: 2 Medium Learning Objective: 06-03 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION]14. Lean production should result in reduced inventories. If lean production is successfully implemented, the difference in net operating income computed under the absorption and variable costing methods should be reduced. Answer: T Difficulty: 3 Hard Learning Objective: 06-03 Topic Area: Blooms: Analyze AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 15. Assuming the LIFO inventory flow assumption, when production exceeds sales for the period, absorption costing net operating income will exceed variable costing net operating income. Answer: T Difficulty: 2 Medium Learning Objective: 06-03 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 16. Under the LIFO inventory flow assumption, if the number of units in inventories increase between the beginning and end of the period, absorption costing net operating income will generally be greater than variable costing net operating income. Answer: T Difficulty: 2 Medium Learning Objective: 06-03 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 17. Segment margin is sales less variable expenses less traceable fixed expenses. Answer: T Difficulty: 1 Easy Learning Objective: 06-04 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 18. All other things the same, if a division's traceable fixed expenses decrease then the division's segment margin will decrease. Answer: F Difficulty: 2 MediumLearning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 19. The salary paid to a store manager is not a traceable fixed expense of the store. Answer: F Difficulty: 2 Medium Learning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 20. A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products. Answer: T Difficulty: 1 Easy Learning Objective: 06-04 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 21. Allocating common fixed costs to segments on segmented income statements increases the usefulness of such statements. Answer: T Difficulty: 1 Easy Learning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 22. If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should be considered a common cost. Answer: T Difficulty: 2 Medium Learning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical ThinkingAICPA: FN Measurement Feedback: [QUESTION] 23. Segmented statements for internal use should not be prepared using the contribution format. Answer: F Difficulty: 1 Easy Learning Objective: 06-04 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 24. When using segmented income statements, the dollar sales for a company to break even equals the traceable fixed expenses divided by the overall CM ratio. Answer: F Difficulty: 1 Easy Learning Objective: 06-05 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 25. Common fixed expenses should not be allocated to business segments when performing break-even calculations and making decisions. Answer: T Difficulty: 2 Medium Learning Objective: 06-05 Topic Area: Blooms: Understand AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 26. When computing the break even for a segment, the calculations include the company’s common fixed expenses. Answer: F Difficulty: 1 Easy Learning Objective: 06-05 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Multiple Choice[QUESTION] 27. How would the following costs be classified (product or period) under variable costing at a retail clothing store? Cost of purchasing clothingSales commissions A)Product Product B)Product Period C )Period Product D )Period Period Answer: B Difficulty: 2 Medium Learning Objective: 06-01 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 28. Which of the following costs at a manufacturing company would be treated as a product cost under variable costing? A) direct material cost B) property taxes on the factory building C) sales manager's salary D) sales commissions Answer: A Difficulty: 2 Medium Learning Objective: 06-01 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 29. A cost that would be included in product costs under both absorption costing and variable costing is: A) supervisory salaries. B) factory rent. C) variable manufacturing costs. D) variable selling expenses. Answer: C Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 30. The costing method that treats all fixed costs as period costs is: A) absorption costing.B) job-order costing. C) variable costing. D) process costing. Answer: C Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 31. Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that: A) variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs. B) variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs. C) variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs. D) variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs. Answer: D Difficulty: 2 Medium Learning Objective: 06-01 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 32. Which of the following is true of a company that uses absorption costing? A) Net operating income fluctuates directly with changes in sales volume. B) Fixed production and fixed selling costs are considered to be product costs. C) Unit product costs can change as a result of changes in the number of units manufactured. D) Variable selling expenses are included in product costs. Answer: C Difficulty: 2 Medium Learning Objective: 06-01 Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION]33. A reason why absorption costing income statements are sometimes difficult to interpret is that: A) they omit variable expenses entirely in computing net operating income. B) they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories. C) they include all fixed manufacturing overhead on the income statement each year as a period cost. D) they ignore inventory levels in determining cost of goods sold. Answer: B Difficulty: 2 Medium Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 34. When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will: A) fluctuate in direct proportion to changes in production. B) remain constant. C) fluctuate inversely with changes in production. D) be greater than net operating income under absorption costing. Answer: B Difficulty: 2 Medium Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 35. Which of the following will usually be found on an income statement prepared using absorption costing? Contribution Margin Gross Margin A)Yes Yes B)Yes No C )No Yes D )No No Answer: C Difficulty: 1 Easy Learning Objective: 06-02 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 36. In its first year of operations, Bronfren Corporation produced 800,000 sets and sold 780,000 sets of artificial tan lines. What would have happened to net operating income in this first year under the following costing methods if Bronfren had produced 20,000 fewer sets? (Assume that Bronfren has both variable and fixed production costs.)Variable costing Absorption costing A)No effect Increase B)Decrease Increase C )Decrease Decrease D )No effect Decrease Answer: D Difficulty: 2 Medium Learning Objective: 06-02 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 37. Net operating income computed under variable costing would exceed net operating income computed using absorption costing if: A) units sold exceed units produced. B) units sold are less than units produced. C) units sold equal units produced. D) the average fixed cost per unit is zero. Answer: A Difficulty: 2 Medium Learning Objective: 06-03 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 38. Generally speaking, net operating income under variable and absorption costing will: A) always be equal. B) never be equal. C) be equal only when production and sales are equal. D) be equal only when production exceeds sales. Answer: C Difficulty: 2 Medium Learning Objective: 06-03 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 39. When sales exceed production and the company uses the LIFO inventory flow assumption, the net operating income reported under variable costing generally will be: A) less than net operating income reported under absorption costing. B) greater than net operating income reported under absorption costing.C) equal to net operating income reported under absorption costing. D) higher or lower because no generalization can be made. Answer: B Difficulty: 2 Medium Learning Objective: 06-03 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 40. Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole? A) the product line's sales dollars B) the product line's contribution margin C) the product line's segment margin D) the product line's segment margin minus an allocated portion of common fixed expenses Answer: C Difficulty: 2 Medium Learning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 41. Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores? A) store manager salaries B) store building depreciation expense C) the cost of corporate advertising aired during the Super Bowl D) cost of goods sold at each store Answer: C Difficulty: 2 Medium Learning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 42. The impact on net operating income of a small change in sales for a segment is best predicted by using: A) the contribution margin ratio. B) the segment margin. C) the ratio of the segment margin to sales. D) net sales less segment fixed costs. Answer: A Difficulty: 3 HardLearning Objective: 06-04 Topic Area: Blooms: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 43. When using data from a segmented income statement, the dollar sales for a segment to break even is equal to: A) Traceable fixed expenses ÷ Segment CM ratio B) Common fixed expenses ÷ Segment CM ratio C) (Traceable fixed expenses + Common fixed expenses) ÷ Segment CM ratio D) Non-traceable fixed expenses ÷ Segment CM ratio Answer: A Difficulty: 1 Easy Learning Objective: 06-05 Topic Area: Blooms: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 44. Allocating common fixed expenses to business segments: A) may cause managers to erroneously discontinue business segments. B) may cause managers to erroneously keep business segments that should be dropped.. C) ensures that all costs are covered. D) helps managers make good decisions. Answer: A Difficulty: 2 Medium Learning Objective: 06-05 Topic Area: Blooms: Understand AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: [QUESTION] 45. Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year ...................... 7,000 Variable costs per unit: Direct materials.................................................... $51 Direct labor.......................................................... $12 Variable manufacturing overhead ........................ $2 Variable selling and administrative expense ........$5 Fixed costs per year: Fixed manufacturing overhead ............................. $441,000 Fixed selling and administrative expense ............$112,000 The absorption costing unit product cost is: A) $149 per unitB) $65 per unit C) $63 per unit D) $128 per unit Answer: D Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Direct materials................................................................................. $51 Direct labor........................................................................................ 12 Variable manufacturing overhead ...................................................... 2 Fixed manufacturing overhead cost ($441,000 ÷ 7,000 units) ...........63 Absorption costing unit product cost .................................................. $128 [QUESTION] 46. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price....................................................... $121 Units in beginning inventory .............................. 0 Units produced.................................................. 6,000 Units sold.......................................................... 5,600 Units in ending inventory ................................... 400 Variable costs per unit: Direct materials.............................................. $38 Direct labor.................................................... $53 Variable manufacturing overhead .................. $3 Variable selling and administrative expense . .$11 Fixed costs: Fixed manufacturing overhead ...................... $60,000 Fixed selling and administrative expense ......$28,000 What is the total period cost for the month under variable costing? A) $149,600 B) $60,000 C) $88,000 D) $89,600 Answer: A Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Variable selling and administrative expense ($11 per unit × 5,600 units sold) .....................$ 61,600 Fixed manufacturing overhead ........................... 60,000 Fixed selling and administrative expense ...........28,000Variable costing total period cost ........................ $149,600 [QUESTION] 47. Rhea Corporation has provided the following data for its two most recent years of operation: Selling price per unit ................................................................ $67 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $10 Direct labor........................................................................ $5 Variable manufacturing overhead ...................................... $3 Fixed manufacturing overhead per year ............................... $252,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$4 Fixed selling and administrative expense per year ...............$65,000 Year 1Year 2 Units in beginning inventory ................. 01,000 Units produced during the year .............9,0007,000 Units sold during the year .....................8,0007,000 Units in ending inventory ...................... 1,0001,000 The net operating income (loss) under absorption costing in Year 2 is closest to: A) $6,000 B) $99,000 C) ($2,000) D) $71,000 Answer: A Difficulty: 2 Medium Learning Objective: 06-01 Learning Objective: 06-02 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Absorption costing unit product costs: Year 1Year 2 Direct materials........................................................................................... $10$10 Direct labor.................................................................................................. 55 Variable manufacturing overhead ................................................................ 33 Fixed manufacturing overhead ($252,000 ÷ 9,000 units produced; $252,000 ÷ 7,000 units produced) ...2836 Absorption costing unit product cost ........................................................... $46$54 Absorption costing income statement: Year 2 Sales [(8,000 units sold × $67 per unit); (7,000 units sold × $67 per unit)] ...$469,000 Cost of goods sold [(8,000 units sold × $46 per unit); ((1,000 units sold × $46 per unit) + (6,000 units sold × $54 per unit)) = $46,000 + $324,000)] ........................................................................... 370,000 Gross margin................................................................................................ 99,000 Selling and administrative expenses 93,000[((8,000 units sold × $4 per unit) + $65,000); ((7,000 units sold × $4 per unit) + $65,000)] ............................................. Net operating income (loss) .......................................................................... $6,000 [QUESTION] 48. Homeyer Corporation has provided the following data for its two most recent years of operation: Selling price per unit ................................................................ $71 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $12 Direct labor........................................................................ $6 Variable manufacturing overhead ...................................... $3 Fixed manufacturing overhead per year ............................... $264,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$4 Fixed selling and administrative expense per year ...............$74,000 Year 1Year 2 Units in beginning inventory ................. 03,000 Units produced during the year .............11,00012,000 Units sold during the year .....................8,00014,000 Units in ending inventory ...................... 3,0001,000 The net operating income (loss) under absorption costing in Year 1 is closest to: A) $102,000 B) $30,000 C) $176,000 D) $208,000 Answer: A Difficulty: 1 Easy Learning Objective: 06-01 Learning Objective: 06-02 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Absorption costing unit product cost: Year 1 Direct materials............................................... $12 Direct labor...................................................... 6 Variable manufacturing overhead .................... 3 Fixed manufacturing overhead ($264,000 ÷ 11,000 units produced) ............24 Absorption costing unit product cost ................$45 Absorption costing income statement: Year 1 Sales [(8,000 units sold × $71 per unit)] ............................. $568,000 Cost of goods sold [(8,000 units sold × $45 per unit)] .........360,000 Gross margin...................................................................... 208,000 Selling and administrative expenses 106,000[((8,000 units sold × $4 per unit) + $74,000)] ................. Net operating income (loss) ................................................ $102,000 [QUESTION] 49. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory ................................. 0 Units produced..................................................... 8,900 Units sold.............................................................. 8,500 Units in ending inventory ...................................... 400 Variable costs per unit: Direct materials................................................. $26 Direct labor........................................................ $25 Variable manufacturing overhead ...................... $4 Variable selling and administrative expense ......$4 Fixed costs: Fixed manufacturing overhead .......................... $249,200 Fixed selling and administrative expense ..........$17,000 What is the variable costing unit product cost for the month? A) $59 per unit B) $83 per unit C) $87 per unit D) $55 per unit Answer: D Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Direct materials....................................... $26 Direct labor............................................. 25 Variable manufacturing overhead ...........4 Variable costing unit product cost ...........$55 [QUESTION] 50. Mccrone Corporation has provided the following data for its two most recent years of operation: Selling price per unit ................................................................ $59 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $11 Direct labor........................................................................ $6 Variable manufacturing overhead ...................................... $4 Fixed manufacturing overhead per year ............................... $88,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$4 Fixed selling and administrative expense per year ...............$80,000 Year 1Year 2Units in beginning inventory ................. 01,000 Units produced during the year .............11,0008,000 Units sold during the year .....................10,0005,000 Units in ending inventory ...................... 1,0004,000 The net operating income (loss) under variable costing in Year 1 is closest to: A) $380,000 B) $340,000 C) $180,000 D) $172,000 Answer: D Difficulty: 1 Easy Learning Objective: 06-01 Learning Objective: 06-02 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Variable costing unit product cost: Year 1 Direct materials........................................ $11 Direct labor.............................................. 6 Variable manufacturing overhead ............4 Variable costing unit product cost ............$21 Variable costing income statement: Year 1 Sales [(10,000 units sold × $59 per unit)] ............. $590,000 Variable expenses: Variable cost of goods sold [(10,000 units sold × $21 per unit)] ...............210,000 Variable selling and administrative expense [(10,000 units sold × $4 per unit)] .................40,000250,000 Contribution margin.............................................. 340,000 Fixed expenses: Fixed manufacturing overhead ......................... 88,000 Fixed selling and administrative expenses ........80,000168,000 Net operating income ........................................... $172,000 [QUESTION] 51. Kray Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced ....................................... 6,000 Variable costs per unit: Direct materials.................................................... $40 Direct labor.......................................................... $19 Variable manufacturing overhead ........................ $8 Variable selling and administrative expense ........$2 Fixed costs: Fixed manufacturing overhead ............................. $144,000 Fixed selling and administrative expense ............$198,000 There were no beginning or ending inventories. The variable costing unit product cost was:A) $91 per unit B) $67 per unit C) $69 per unit D) $61 per unit Answer: B Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Direct materials....................................... $ 40 Direct labor............................................. 19 Variable manufacturing overhead ...........8 Variable costing unit product cost ...........$67 [QUESTION] 52. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price........................................................ $133 Units in beginning inventory ................................ 0 Units produced.................................................... 7,000 Units sold............................................................ 6,800 Units in ending inventory ..................................... 200 Variable costs per unit: Direct materials................................................ $41 Direct labor...................................................... $57 Variable manufacturing overhead .................... $5 Variable selling and administrative expense ....$4 Fixed costs: Fixed manufacturing overhead ........................ $133,000 Fixed selling and administrative expense ........$34,000 What is the total period cost for the month under absorption costing? A) $61,200 B) $133,000 C) $34,000 D) $194,200 Answer: A Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Variable selling and administrative expense $4.00 per unit × 6,800 units sold ..................$27,200 Fixed selling and administrative expense ........34,000 Absorption costing total period cost .................$61,200[QUESTION] 53. Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced ....................................... 8,000 Variable costs per unit: Direct materials.................................................... $37 Direct labor.......................................................... $56 Variable manufacturing overhead ........................ $4 Variable selling and administrative expense ........$2 Fixed costs: Fixed manufacturing overhead ............................. $312,000 Fixed selling and administrative expense ............$448,000 There were no beginning or ending inventories. The absorption costing unit product cost was: A) $93 per unit B) $97 per unit C) $136 per unit D) $194 per unit Answer: C Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Direct materials.............................................................................. $37 Direct labor..................................................................................... 56 Variable manufacturing overhead ................................................... 4 Fixed manufacturing overhead cost ($312,000 ÷ 8,000 units) ........39 Absorption costing unit product cost .............................................. $136 [QUESTION] 54. A company produces a single product. Variable production costs are $21 per unit and variable selling and administrative expenses are $4 per unit. Fixed manufacturing overhead totals $30.000 and fixed selling and administration expenses total $36.000. Assuming a beginning inventory of zero, production of 6,000 units and sales of 5,600 units, the dollar value of the ending inventory under variable costing would be: A) $10,000 B) $8,400 C) $12,000 D) $14,400 Answer: B Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Units in ending inventory = Units in beginning inventory + Units produced – Units sold = 0 units + 6,000 units – 5,600 units = 400 unitsValue of ending inventory under variable costing = Units in ending inventory × Variable production cost = 400 units × $21 per unit = $8,400 [QUESTION] 55. A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory .............................. 0 Units produced.................................................. 2,900 Units sold.......................................................... 2,600 Units in ending inventory ................................... 300 Variable costs per unit: Direct materials.............................................. $49 Direct labor.................................................... $58 Variable manufacturing overhead .................. $6 Variable selling and administrative expense . .$11 Fixed costs: Fixed manufacturing overhead ...................... $55,100 Fixed selling and administrative expense ......$18,200 What is the absorption costing unit product cost for the month? A) $124 per unit B) $132 per unit C) $113 per unit D) $143 per unit Answer: B Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Direct materials........................................................................... $49 Direct labor................................................................................. 58 Variable manufacturing overhead ............................................... 6 Fixed manufacturing overhead cost ($55,100 ÷ 2,900 units) ......19 Absorption costing unit product cost ........................................... $132 [QUESTION] 56. Foggs Corporation has provided the following data for its two most recent years of operation: Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $10 Direct labor........................................................................ $6 Variable manufacturing overhead ...................................... $5 Fixed manufacturing overhead per year ............................... $520,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$6 Fixed selling and administrative expense per year ...............$63,000 Year 1Year 2 Units in beginning inventory ................. 01,000Units produced during the year .............10,00013,000 Units sold during the year .....................9,00011,000 Units in ending inventory ...................... 1,0003,000 The unit product cost under absorption costing in Year 2 is closest to: A) $40.00 B) $21.00 C) $67.00 D) $61.00 Answer: D Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Absorption costing unit product costs: Year 2 Direct materials............................................... $10 Direct labor...................................................... 6 Variable manufacturing overhead .................... 5 Fixed manufacturing overhead ($520,000 ÷ 13,000 units produced) ............40 Absorption costing unit product cost ................$61 [QUESTION] 57. Shun Corporation manufactures and sells a hand held calculator. The following information relates to Shun's operations for last year: Unit product cost under variable costing ...................... $5.20per unit Fixed manufacturing overhead cost for the year ..........$260,000 Fixed selling and administrative expense for the year .$180,000 Units (calculators) produced and sold .......................... 400,000 What is Shun's absorption costing unit product cost for last year? A) $4.10 per unit B) $4.55 per unit C) $5.85 per unit D) $6.30 per unit Answer: C Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Unit product cost under variable costing ...................... $5.20per unit Fixed manufacturing overhead cost per unit ($260,000 ÷ 400,000 units) ...................................... $0.65per unit Absorption costing unit product cost ............................ $5.85per unit [QUESTION]58. Badoni Corporation has provided the following data for its two most recent years of operation: Selling price per unit ................................................................ $85 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $10 Direct labor........................................................................ $6 Variable manufacturing overhead ...................................... $4 Fixed manufacturing overhead per year ............................... $96,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$5 Fixed selling and administrative expense per year ...............$77,000 Year 1Year 2 Units in beginning inventory ................. 01,000 Units produced during the year .............8,0006,000 Units sold during the year .....................7,0003,000 Units in ending inventory ...................... 1,0004,000 The net operating income (loss) under variable costing in Year 2 is closest to: A) $180,000 B) $195,000 C) $59,000 D) $7,000 Answer: D Difficulty: 1 Easy Learning Objective: 06-01 Learning Objective: 06-02 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Variable costing unit product costs: Year 1Year 2 Direct materials........................................ $10$10 Direct labor.............................................. 66 Variable manufacturing overhead ............44 Variable costing unit product cost ............$20$20 Variable costing income statements: Year 2 Sales [(3,000 units sold × $85 per unit)] ............... $255,000 Variable expenses: Variable cost of goods sold [(3,000 units sold × $20 per unit)] .................60,000 Variable selling and administrative expense [(3,000 units sold × $5 per unit)] ................... 15,00075,000 Contribution margin.............................................. 180,000 Fixed expenses: Fixed manufacturing overhead ......................... 96,000 Fixed selling and administrative expenses ........77,000173,000 Net operating income ........................................... $7,000 [QUESTION] 59. Bitonti Corporation has provided the following data for its most recent year of operation: Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $9 Direct labor........................................................................ $7 Variable manufacturing overhead ...................................... $5 Fixed manufacturing overhead per year ............................... $156,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$5 Fixed selling and administrative expense per year ...............$81,000 Units in beginning inventory ................. 0 Units produced during the year .............12,000 Units sold during the year .....................11,000 Units in ending inventory ...................... 1,000 The unit product cost under absorption costing is closest to: A) $34.00 B) $21.00 C) $13.00 D) $39.00 Answer: A Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Absorption costing unit product costs: Direct materials............................................... $9 Direct labor...................................................... 7 Variable manufacturing overhead .................... 5 Fixed manufacturing overhead ($156,000 ÷ 12,000 units produced) ............13 Absorption costing unit product cost ................$34 [QUESTION] 60. Stoneberger Corporation produces a single product and has the following cost structure: Number of units produced each year ...................... 4,000 Variable costs per unit: Direct materials.................................................... $50 Direct labor.......................................................... $72 Variable manufacturing overhead ........................ $6 Variable selling and administrative expense ........$3 Fixed costs per year: Fixed manufacturing overhead ............................. $296,000 Fixed selling and administrative expense ............$76,000 The variable costing unit product cost is:A) $128 per unit B) $125 per unit C) $202 per unit D) $131 per unit Answer: A Difficulty: 1 Easy Learning Objective: 06-01 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Direct materials....................................... $ 50 Direct labor............................................. 72 Variable manufacturing overhead ...........6 Variable costing unit product cost ...........$128 [QUESTION] 61. Silver Corporation produces a single product. Last year, the company's variable production costs totaled $7,500 and its fixed manufacturing overhead costs totaled $4,500. The company produced 3,000 units during the year and sold 2,400 units. There were no units in the beginning inventory. Which of the following statements is true? A) Under variable costing, the units in the ending inventory will be costed at $4.00 each. B) The net operating income under absorption costing for the year will be $900 lower than the net operating income under variable costing. C) The ending inventory under variable costing will be $900 lower than the ending inventory under absorption costing. D) Under absorption costing, the units in ending inventory will be costed at $2.50 each. Answer: C Difficulty: 3 Hard Learning Objective: 06-01 Learning Objective: 06-02 Learning Objective: 06-03 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Units in ending inventory = Units in beginning inventory + Units produced – Units sold = 0 units + 3,000 units – 2,400 units = 600 units Absorption costing unit product cost = ($7,500 + $4,500) ÷ 3,000 units = $4.00 per unit Variable costing unit product cost = $7,500 ÷ 3,000 units = $2.50 per unit Absorption costing ending inventory ($4.00 per unit × 600 units) ....................$2,40 0 Variable costing ending inventory ($2.50 per unit × 600 units) .........................1,500 Difference........................................................................................................ $ 900 [QUESTION] 62. Kaaua Corporation has provided the following data for its two most recent years of operation: Selling price per unit ................................................................ $83 Manufacturing costs: Variable manufacturing cost per unit produced:Direct materials................................................................. $13 Direct labor........................................................................ $7 Variable manufacturing overhead ...................................... $4 Fixed manufacturing overhead per year ............................... $396,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$4 Fixed selling and administrative expense per year ...............$72,000 Year 1Year 2 Units in beginning inventory ................. 02,000 Units produced during the year .............12,00011,000 Units sold during the year .....................10,0009,000 Units in ending inventory ...................... 2,0004,000 Which of the following statements is true for Year 2? A) The amount of fixed manufacturing overhead deferred in inventories is $534,000 B) The amount of fixed manufacturing overhead released from inventories is $78,000 C) The amount of fixed manufacturing overhead released from inventories is $534,000 D) The amount of fixed manufacturing overhead deferred in inventories is $78,000 Answer: D Difficulty: 2 Medium Learning Objective: 06-01 Learning Objective: 06-03 Topic Area: Blooms: Apply AACSB: Analytical Thinking AICPA: BB Critical Thinking AICPA: FN Measurement Feedback: Absorption costing unit product costs: Year 2 Direct materials........................................................................................... $13 Direct labor.................................................................................................. 7 Variable manufacturing overhead ................................................................ 4 Fixed manufacturing overhead ($396,000 ÷ 11,000 units produced) ..........36 Absorption costing unit product cost ........................................................... $60 Year 2 Fixed manufacturing overhead in ending inventory [(4,000 units × $36 per unit)] .............................................................. $144,000 Fixed manufacturing overhead in beginning inventory ........................... 66,000 Fixed manufacturing overhead deferred in (released from) inventories .$78,000 [QUESTION] 63. Simila Corporation has provided the following data for its most recent year of operation: Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials................................................................. $11 Direct labor........................................................................ $7 Variable manufacturing overhead ...................................... $5 Fixed manufacturing overhead per year ............................... $308,000 Selling and administrative expenses: Variable selling and administrative expense per unit sold ....$5 Fixed selling and administrative expense per year ...............$81,000