Question 1

Gross profit is calculated by deducting ________ from sales revenue.

Accepted Answer

A)  total fixed costs
B)  cost of goods sold
C)  total variable costs
D)  selling and administrative costsE) A) and C)
F) A) and B)

Question 2

E-trax Inc.has provided the following financial information for the year 2015:  What is the unit product cost for 2015 using variable costing?

Accepted Answer

A)  $72
B)  $75
C)  $60
D)  $65E) C) and D)
F) All of the above

Question 3

When there is no beginning inventory and all the goods that are produced are sold,the operating income ________.

Accepted Answer

A)  will be higher under absorption costing than variable costing
B)  will be lower under absorption costing than variable costing
C)  will be higher than the gross profit under variable costing
D)  will be the same for both absorption costing and variable costingE) A) and C)
F) All of the above

Question 4

Groovelex Inc.reports the following information for the year ended December 31,2014:  
-The operating profit calculated using variable costing and absorption costing amounted to $9,270 and $11,250,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under variable costing for the year 2014.

Accepted Answer

A)  $10,230
B)  $8,250
C)  $20,750
D)  $25,000E) C) and D)
F) All of the above

Question 5

Which of the following costing methods charges all the manufacturing costs to the products?

Accepted Answer

A)  variable costing
B)  direct costing
C)  absorption costing
D)  contribution costingE) A) and C)
F) C) and D)

Question 6

Which of the following statements is true of variable costing?

Accepted Answer

A)  It considers variable manufacturing overhead as period costs.
B)  It considers fixed manufacturing overhead as product costs.
C)  It considers variable selling and administrative costs as product costs.
D)  It considers fixed selling and administrative costs as period costs.E) B) and C)
F) None of the above

Question 7

When all the units produced are sold,the profit calculated under absorption costing is higher when compared to the profit calculated under variable costing.

Accepted Answer

A) True 
 B)False

Question 8

Volplex Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is true of the effect of costing systems on the financial results of Volplex?

Accepted Answer

A)  Its operating profit will be significantly higher if the company uses absorption costing instead of variable costing.
B)  Its operating profit will be significantly lower if the company uses absorption costing instead of variable costing.
C)  Its operating profit will vary a little if the company uses absorption costing instead of variable costing.
D)  Its operating profit will be negative if the company uses absorption costing instead of variable costing.E) A) and C)
F) A) and B)

Question 9

Perfect Clean Inc.provides housekeeping services.The following financial data has been provided. 
- Calculate the contribution margin and the contribution margin ratio.

Accepted Answer

A)  $8,520; 17.0%
B)  $7,550; 15.1%
C)  $8,250; 16.5%
D)  $7,150; 14.3%E) B) and D)
F) B) and C)

Question 10

Greenlam Inc.started the year with 200 units in the Finished Goods Inventory account.It produced 600 units during the year and sold 800 units.If Greenlam uses variable costing:

Accepted Answer

A)  its operating profit for the period will be higher than absorption costing.
B)  its operating profit for the period will be lower than absorption costing.
C)  its value of ending inventory reported in the balance sheet will be higher than absorption costing.
D)  its operating profit will be the same under absorption costing.E) None of the above
F) A) and D)

Question 11

Peter Newton,a production supervisor at BeThink Inc.,uses variable costing for any cost control decisions that he has to take.Which of the following is the reason for his choice?

Accepted Answer

A)  fixed costs are not relevant in the long-run
B)  only variable costs are controllable in the long and short run
C)  absorption costing is not relevant for long-run decisions
D)  lower management usually does not have control over most fixed costsE) A) and B)
F) B) and D)

Question 12

High-Tech Computer Services provide services to corporate and individual customers.During the month of June,the corporate business segment provided services to 500 customers and earned $60,000 in revenue.The individual business segment provided services to 400 customers and earned $35,000 in revenue.The variable costs for the corporate and individual business segment amounted $32,500 and $25,300,respectively.Additionally,the fixed costs of the company amounted to $8,500.The contribution margin ratios of the corporate segment and individual segment are ________,respectively.

Accepted Answer

A)  40.88% and 26.85%
B)  45.85% and 24.82%
C)  44.23% and 27.71%
D)  45.83% and 27.71%E) C) and D)
F) A) and B)

Question 13

Variable costing considers only ________ costs when determining product costs.

Accepted Answer

A)  fixed manufacturing
B)  variable manufacturing
C)  variable selling and administrative
D)  fixed selling and administrativeE) B) and D)
F) A) and C)

Question 14

In its first year of business,Greenlam Inc.produced and sold 600 units.If Greenlam uses variable costing,________.

Accepted Answer

A)  its operating profit for the period will be higher than absorption costing
B)  its operating profit for the period will be lower than absorption costing
C)  its value of ending inventory reported in the balance sheet will be higher than absorption costing
D)  its operating profit will be the same under absorption costingE) A) and B)
F) A) and C)

Question 15

High-Tech Computer Services provide services to corporate and individual customers.During the month of June,the corporate business segment provided services to 500 customers and earned $60,000 in revenue.The individual business segment provided services to 400 customers and earned $35,000 in revenue.The variable costs for the corporate and individual business segment amounted $32,500 and $25,300,respectively.Additionally,the fixed costs of the company amounted to $8,500.Calculate the contribution margin from each corporate customer.

Accepted Answer

A)  $24.25
B)  $52.60
C)  $56.40
D)  $55.00E) A) and B)
F) A) and C)

Question 16

Which of the following is considered a period cost under variable costing but not under absorption costing?

Accepted Answer

A)  fixed selling and administrative costs
B)  variable manufacturing costs
C)  fixed manufacturing overhead
D)  variable selling and administrative costsE) A) and D)
F) B) and C)

Question 17

Variable costing prepares the income statement using the traditional format.

Accepted Answer

A) True 
 B)False

Question 18

Absorption costing is required by the Generally Accepted Accounting Principles (GAAP)for financial statements issued to investors,creditors,and other external users.

Accepted Answer

A) True 
 B)False

Question 19

Jupiter Inc.reports the following information for August:  Calculate the contribution margin for the month of August.

Accepted Answer

A)  $450,000
B)  $600,000
C)  $700,000
D)  $650,000E) B) and C)
F) A) and D)

Question 20

When production is more than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning inventories.Which of the following gives the correct reason for the above statement?

Accepted Answer

A)  all costs incurred have been recorded as expenses
B)  a portion of the fixed manufacturing overhead is still in the ending Finished Goods Inventory account
C)  all selling and administrative expenses have been recorded as period costs
D)  fixed manufacturing costs have not been considered while calculating the operating profitsE) B) and D)
F) A) and D)

Exam 21: Variable Costing

Greenlam Inc.started the year with 200 units in the Finished Goods Inventory account.It produced 600 units during the year and sold 800 units.If Greenlam uses variable costing:

Correct Answer
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Absorption costing is required by the Generally Accepted Accounting Principles (GAAP)for financial statements issued to investors,creditors,and other external users.

Correct Answer
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Peter Newton,a production supervisor at BeThink Inc.,uses variable costing for any cost control decisions that he has to take.Which of the following is the reason for his choice?

Correct Answer
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Which of the following costing methods charges all the manufacturing costs to the products?

Correct Answer
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E-trax Inc.has provided the following financial information for the year 2015: What is the unit product cost for 2015 using variable costing?

Correct Answer
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Correct Answer
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Gross profit is calculated by deducting ________ from sales revenue.

Correct Answer
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Volplex Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is true of the effect of costing systems on the financial results of Volplex?

Correct Answer
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Variable costing prepares the income statement using the traditional format.

Correct Answer
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Which of the following is considered a period cost under variable costing but not under absorption costing?

Correct Answer
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When production is more than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning inventories.Which of the following gives the correct reason for the above statement?

Correct Answer
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When there is no beginning inventory and all the goods that are produced are sold,the operating income ________.

Correct Answer
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When all the units produced are sold,the profit calculated under absorption costing is higher when compared to the profit calculated under variable costing.

Correct Answer
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Jupiter Inc.reports the following information for August: Calculate the contribution margin for the month of August.

Correct Answer
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Variable costing considers only ________ costs when determining product costs.

Correct Answer
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Perfect Clean Inc.provides housekeeping services.The following financial data has been provided. - Calculate the contribution margin and the contribution margin ratio.

Correct Answer
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Correct Answer
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Which of the following statements is true of variable costing?

Correct Answer
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In its first year of business,Greenlam Inc.produced and sold 600 units.If Greenlam uses variable costing,________.

Correct Answer
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Correct Answer
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Exam 21: Variable Costing

Greenlam Inc.started the year with 200 units in the Finished Goods Inventory account.It produced 600 units during the year and sold 800 units.If Greenlam uses variable costing:

Correct AnswerverifiedShow Answer

Absorption costing is required by the Generally Accepted Accounting Principles (GAAP)for financial statements issued to investors,creditors,and other external users.

Correct AnswerverifiedShow Answer

Peter Newton,a production supervisor at BeThink Inc.,uses variable costing for any cost control decisions that he has to take.Which of the following is the reason for his choice?

Correct AnswerverifiedShow Answer

Which of the following costing methods charges all the manufacturing costs to the products?

Correct AnswerverifiedShow Answer

E-trax Inc.has provided the following financial information for the year 2015: What is the unit product cost for 2015 using variable costing?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Gross profit is calculated by deducting ________ from sales revenue.

Correct AnswerverifiedShow Answer

Volplex Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is true of the effect of costing systems on the financial results of Volplex?

Correct AnswerverifiedShow Answer

Variable costing prepares the income statement using the traditional format.

Correct AnswerverifiedShow Answer

Which of the following is considered a period cost under variable costing but not under absorption costing?

Correct AnswerverifiedShow Answer

When production is more than sales,the operating income will be higher under absorption costing than variable costing.Assume zero beginning inventories.Which of the following gives the correct reason for the above statement?

Correct AnswerverifiedShow Answer

When there is no beginning inventory and all the goods that are produced are sold,the operating income ________.

Correct AnswerverifiedShow Answer

When all the units produced are sold,the profit calculated under absorption costing is higher when compared to the profit calculated under variable costing.

Correct AnswerverifiedShow Answer

Jupiter Inc.reports the following information for August: Calculate the contribution margin for the month of August.

Correct AnswerverifiedShow Answer

Variable costing considers only ________ costs when determining product costs.

Correct AnswerverifiedShow Answer

Perfect Clean Inc.provides housekeeping services.The following financial data has been provided. - Calculate the contribution margin and the contribution margin ratio.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is true of variable costing?

Correct AnswerverifiedShow Answer

In its first year of business,Greenlam Inc.produced and sold 600 units.If Greenlam uses variable costing,________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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