Deck 8: Absorption and Variable Costing, and Inventory Management

Question 1

Which of the following types of costs is NOT included in product cost?

A)overhead
B)direct materials
C)variable selling expense
D)fixed factory overhead

Answer 1

C

Question 2

Which of the following costs is NOT included in inventory under absorption costing?

A)direct materials
B)direct labour
C)fixed selling expenses
D)fixed factory overhead

Answer 2

C

Question 3

What is the general relationship between inventory values calculated using variable costing and inventory values calculated using absorption costing?

A)They will be equal.
B)Inventory values calculated using variable costing will be less.
C)Inventory values calculated using variable costing will be greater.
D)Inventory values calculated using variable costing will be twice as much.

Answer 3

B

Question 4

Which inventory cost can include processing costs,cost of insurance for shipping,and unloading?

A)the ordering cost
B)the carrying cost
C)the stockout cost
D)the setup cost

Question 5

Which of the following best defines variable costing?

A)a good way to value inventories for the balance sheet
B)a useful tool for external reporting purposes
C)not a useful tool for companies with multiple segments
D)a useful tool for management decision making

Question 6

Suppose production is less than sales volume.What is the relationship between net income under absorption costing and profits when using variable-costing procedures?

A)Net income under absorption costing will be greater than profits when using variable costing.
B)Net income under absorption costing will be less than profits when using variable costing.
C)Net income under absorption costing will be equal to profits when using variable costing.
D)Net income under absorption costing will be randomly different from profits when using variable costing.

Question 7

Which of the following types of costs does NOT appear on a variable costing income statement?

A)direct materials
B)direct labour
C)opportunity cost
D)variable selling expense

Question 8

What is the economic order quantity (EOQ)?

A)the quantity that minimizes total ordering cost
B)the quantity that maximizes total profit
C)the quantity that minimizes total inventory-related costs
D)the quantity that maximizes carrying costs

Question 9

What is the primary difference between variable and absorption costing?

A)inclusion of fixed selling expenses in product costs
B)inclusion of variable factory overhead in period costs
C)inclusion of fixed selling expenses in period costs
D)inclusion of fixed factory overhead in product costs

Question 10

Suppose monthly production volume is constant and sales volume is less than production.How will net income react when using variable-costing procedures?

A)It will be greater than net income determined using absorption costing.
B)It will be less than net income determined using absorption costing.
C)It will be equal to net income determined using absorption costing.
D)It will be equal to contribution margin per unit times units sold.

Question 11

Which of the following is NOT a traditional reason for carrying inventory?

A)to satisfy customer demand
B)to avoid shutting down manufacturing facilities
C)to support a reliable production process
D)to hedge against future price increases

Question 12

What costs do the ordering costs become when the economic order quantity (EOQ)model is applied to units produced within the company?

A)setup costs
B)stockout costs
C)carrying costs
D)safety-stock costs

Question 13

Which inventory cost can include insurance,inventory taxes,and obsolescence?

A)the ordering cost
B)the carrying cost
C)the stockout cost
D)the setup cost

Question 14

What is the relationship between absorption costing net income and variable costing net income?

A)Absorption costing net income exceeds variable costing net income when units produced and sold are equal.
B)Variable costing net income exceeds absorption costing net income when units produced exceed units sold.
C)Absorption costing net income exceeds variable costing net income when units produced are less than units sold.
D)Absorption costing net income exceeds variable costing net income when units produced are greater than units sold.

Question 15

Which accounting method is used for external reporting?

A)absorption costing
B)variable costing
C)transfer price costing
D)responsibility costing

Question 16

Gross margin is to absorption costing as which of the following is to variable costing?

A)gross profit
B)contribution margin
C)net income
D)territory margin

Question 17

Which inventory cost can include lost sales,cost of expediting,and cost of interrupted production?

A)the ordering cost
B)the carrying cost
C)the stockout cost
D)the setup cost

Question 18

What is the formula to calculate total carrying cost?

A)number of orders per year × cost of placing an order
B)number of orders per year/cost of placing an order
C)average number of units in inventory × cost of carrying one unit in inventory
D)average number of units in inventory/cost of carrying one unit in inventory

Question 19

What is the formula to calculate ordering cost?

A)number of orders per year × cost of placing an order
B)number of orders per year/cost of placing an order
C)average number of units in inventory × cost of carrying one unit in inventory
D)average number of units in inventory/cost of carrying one unit in inventory

Question 20

What are the two major costs associated with inventory?

A)ordering costs and setup costs
B)setup costs and stockout costs
C)stockout costs and carrying cost
D)ordering costs and carrying costs

Question 21

Last year, Ella Company produced 10,000 units and sold 9,000 units at a price of $9 per unit. Costs for last year were as follows:
Fixed factory overhead is applied on the basis of expected production. Last year, Ella expected to produce 10,000 units.
$$\begin{array} { l r } \text { Direct materials } & \$ 10,000 \\\text { Direct labour } & 15,000 \\\text { Variable factory overhead } & 5,000 \\\text { Fixed factory overhead } & 20,000 \\\text { Variable selling expense } & 7,200 \\\text { Fixed selling expense } & 5,000 \\\text { Fixed administrative expense } & 12,000\end{array}$$

-Refer to the Figure.What is the operating income for last year under variable costing?

A)$6,800
B)$9,000
C)$9,800
D)$11,800

Question 22

Segment sales revenue minus which of the following sets of costs is equal to segment margin?

A)variable cost of goods sold, variable selling expense, and direct fixed costs
B)variable selling expense, variable cost of goods sold, and common fixed costs
C)variable cost of goods sold, total selling expense, and direct fixed costs
D)variable selling expense, administrative expense, variable cost of goods sold, and direct fixed costs

Question 23

How does a JIT system respond to the problems traditionally solved by carrying inventories?

A)by ensuring that sufficient inventory is on hand to prevent stockouts
B)by purchasing extra materials when price discounts are offered
C)by negotiating long-term contracts with supplier to lock in low prices
D)by selecting an inventory level that minimizes the total of ordering and carrying costs

Question 24

Last year, Ella Company produced 10,000 units and sold 9,000 units at a price of $9 per unit. Costs for last year were as follows:
Fixed factory overhead is applied on the basis of expected production. Last year, Ella expected to produce 10,000 units.
$$\begin{array} { l r } \text { Direct materials } & \$ 10,000 \\\text { Direct labour } & 15,000 \\\text { Variable factory overhead } & 5,000 \\\text { Fixed factory overhead } & 20,000 \\\text { Variable selling expense } & 7,200 \\\text { Fixed selling expense } & 5,000 \\\text { Fixed administrative expense } & 12,000\end{array}$$

-Refer to the Figure.What is the operating income for last year under absorption costing?

A)$11,300
B)$11,800
C)$12,520
D)$36,000

Question 25

Carmel Company uses 810 units of a part each year. The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $4.
Refer to the Figure.Benton has decided to begin ordering 60 units at a time.What is the average annual ordering cost of Benton's new policy?

A)$60
B)$135
C)$150
D)$185

Question 26

2L1S Company orders 250 units at a time and places 15 orders per year.Total ordering cost is $1,100,and total carrying cost is $1,750.What is the economic order quantity?

A)The economic order quantity (EOQ) is 250.
B)The economic order quantity (EOQ) is more than 250.
C)The economic order quantity (EOQ) is less than 250.
D)The economic order quantity (EOQ) is 15.

Question 27

Triple M Company had the following data for the month:
Fixed overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600.
$\begin{array}{lr}\text { Variable costs per unit: } & \\\text { Direct materials } & \$ 4.00 \\\text { Direct labour } & 3.20 \\\text { Variable overhead } & 1.00 \\\text { Variable selling expenses } & 0.40\end{array}$

-Refer to the Figure.What is the operating income under absorption costing?

A)($540)
B)$3,540
C)$3,740
D)$7,980

Question 28

Consider the following portion of a segmented income statement for the year just ended.Assume fixed expenses of Division A include $60,000 of direct expenses and that the discontinuance of the department will not affect the sales of the other departments or reduce the common expenses. What is A's divisional segment margin?
$$\begin{array} { l r } \text { Sales } & \$ 200,000 \\\text { Variable manufacturing costs } & 120,000 \\\text { Gross profit } & \$ 80,000 \\\text { Fixed expenses (direct and allocated) } & 100,000 \\\text { Operating income (loss) } & \$ ( 20,000 )\end{array}$$

A)($10,000)
B)$10,000
C)$40,000
D)$100,000

Question 29

LaTiffa Company orders 250 units at a time and places 15 orders per year.Total ordering cost is $1,100,and total carrying cost is $1,100.Which best describes the economic order quantity?

A)The economic order quantity (EOQ) is 250.
B)The economic order quantity (EOQ) is more than 250.
C)The economic order quantity (EOQ) is less than 250.
D)The economic order quantity (EOQ) is 15.

Question 30

Which of the following would NOT be considered a segment?

A)a division
B)a product line
C)a sales territory
D)a corporation

Question 31

Shedding Company has two divisions with the following segment margins for the current year: Northern,$400,000; Southern,$800,000.Common expenses of the company are $100,000.What is Shedding Company's net income?

A)$300,000
B)$350,000
C)$700,000
D)$1,100,000

Question 32

Lauren Company orders 250 units at a time and places 15 orders per year.Total ordering cost is $1,600,and total carrying cost is $1,250.What is the economic order quantity?

A)The economic order quantity (EOQ) is 250.
B)The economic order quantity (EOQ) is more than 250.
C)The economic order quantity (EOQ) is less than 250.
D)The economic order quantity (EOQ) is 15.

Question 33

Last year, Ella Company produced 10,000 units and sold 9,000 units at a price of $9 per unit. Costs for last year were as follows:
Fixed factory overhead is applied on the basis of expected production. Last year, Ella expected to produce 10,000 units.
$$\begin{array} { l r } \text { Direct materials } & \$ 10,000 \\\text { Direct labour } & 15,000 \\\text { Variable factory overhead } & 5,000 \\\text { Fixed factory overhead } & 20,000 \\\text { Variable selling expense } & 7,200 \\\text { Fixed selling expense } & 5,000 \\\text { Fixed administrative expense } & 12,000\end{array}$$

-Refer to the Figure.Assume that beginning inventory was zero.What is the value of ending inventory under variable costing?

A)$2,000
B)$3,000
C)$3,720
D)$5,000

Question 34

Triple M Company had the following data for the month:
Fixed overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600.
$\begin{array}{lr}\text { Variable costs per unit: } & \\\text { Direct materials } & \$ 4.00 \\\text { Direct labour } & 3.20 \\\text { Variable overhead } & 1.00 \\\text { Variable selling expenses } & 0.40\end{array}$

-Refer to the Figure.What is the unit product cost under absorption costing?

A)$7.20
B)$8.20
C)$8.60
D)$10.20

Question 35

Triple M Company had the following data for the month:
Fixed overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600.
$\begin{array}{lr}\text { Variable costs per unit: } & \\\text { Direct materials } & \$ 4.00 \\\text { Direct labour } & 3.20 \\\text { Variable overhead } & 1.00 \\\text { Variable selling expenses } & 0.40\end{array}$

-Refer to the Figure.What is the operating income under variable costing?

A)($540)
B)$3,540
C)$3,740
D)$7,980

Question 36

Carmel Company uses 810 units of a part each year. The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $4.
Refer to Carmel Company.Carmel has decided to begin ordering 60 units at a time.What is the average annual carrying cost of Benton's new policy?

A)$5
B)$30
C)$120
D)$180

Question 37

Which of the following occurs under a JIT system?

A)Customer demand pulls units through the production line.
B)Safety stock is set at relatively high levels.
C)Stockouts are never a problem.
D)Inventory levels are set at 10% of total production levels.

Question 38

Last year, Ella Company produced 10,000 units and sold 9,000 units at a price of $9 per unit. Costs for last year were as follows:
Fixed factory overhead is applied on the basis of expected production. Last year, Ella expected to produce 10,000 units.
$$\begin{array} { l r } \text { Direct materials } & \$ 10,000 \\\text { Direct labour } & 15,000 \\\text { Variable factory overhead } & 5,000 \\\text { Fixed factory overhead } & 20,000 \\\text { Variable selling expense } & 7,200 \\\text { Fixed selling expense } & 5,000 \\\text { Fixed administrative expense } & 12,000\end{array}$$

-Refer to the Figure.Assume that beginning inventory was zero.What is the value of ending inventory under absorption costing?

A)$2,000
B)$3,000
C)$3,720
D)$5,000

Question 39

Triple M Company had the following data for the month:
Fixed overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600.
$\begin{array}{lr}\text { Variable costs per unit: } & \\\text { Direct materials } & \$ 4.00 \\\text { Direct labour } & 3.20 \\\text { Variable overhead } & 1.00 \\\text { Variable selling expenses } & 0.40\end{array}$

-Refer to the Figure.What is the unit product cost under variable costing?

A)$7.20
B)$8.20
C)$8.60
D)$10.20

Question 40

Prairie Inc.mines three products.Gold ore sells for $1,000 per ton,variable costs are $600 per ton,and fixed mining costs are $250,000.The segment margin for the year was ($100,000).The management of Prairie Mining was considering dropping the mining of gold ore.Only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. What were the sales in tons for the year?

A)200 tons
B)250 tons
C)375 tons
D)1,000 tons

Question 41

Theele Corporation has the following information for April, May, and June:
Production costs per unit (based on 10,000 units) are as follows:
$\begin{array}{lrrr} & \text { April } & \underline{\text { May }} & \text { June } \\\text { Units produced } & 10,000 & 10,000 & 10,000 \\\text { Units sold } & 7,000 & 8,500 & 10,500\end{array}$ Theele Corporation had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months.
$\begin{array}{lr}\text { Direct materials } & \$ 13 \\\text { Direct labour } & 9 \\\text { Variable factory overhead } & 7 \\\text { Fixed factory overhead } & 5 \\\text { Variable selling and administrative expenses } & 10 \\\text { Fixed selling and administrative expenses } & 4\end{array}$

-Refer to the Figure.What is the May ending inventory for Theele Corporation when using the absorption costing method?

A)$39,000
B)$45,000
C)$148,500
D)$300,000

Question 42

The following information pertains to Shark Corporation:
$$\begin{array} { l r } \text { Beginning inventory } & 0 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 2022 \\\text { Direct materials per unit } & 1618 \\\text { Variable overhead per unit } & 48 \\\text { Fixed overhead per unit } & 1012 \\\text { Variable selling costs per unit } & 1214 \\\text { Fixed selling costs per unit } & 1618\end{array}$$

-Refer to the Figure.What is the value of ending inventory when using the absorption-costing method?

A)$200,000
B)$348,000
C)$368,000
D)$390,000

Question 43

The following information pertains to Nute Corporation:
$$\begin{array} { l r } \text { Beginning inventory } & 1,000 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 40 \\\text { Direct materials per unit } & 20 \\\text { Variable overhead per unit } & 10 \\\text { Fixed overhead per unit } & 30 \\\text { Variable selling and administrative costs per unit } & 6 \\\text { Fixed selling and administrative costs per unit } & 14\end{array}$$

-Refer to the Figure.What is the relationship between absorption costing net income and variable costing net income?

A)Absorption costing net income is $150,000 less.
B)Absorption costing net income is $150,000 greater.
C)Absorption costing net income is $240,000 less.
D)Absorption costing net income is $240,000 greater.

Question 44

The following information pertains to Shark Corporation:
$$\begin{array} { l r } \text { Beginning inventory } & 0 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 2022 \\\text { Direct materials per unit } & 1618 \\\text { Variable overhead per unit } & 48 \\\text { Fixed overhead per unit } & 1012 \\\text { Variable selling costs per unit } & 1214 \\\text { Fixed selling costs per unit } & 1618\end{array}$$

-Refer to the Figure.What is the value of ending inventory when using the variable costing method?

A)$288,000
B)$320,000
C)$250,000
D)$390,000

Question 45

Carmel Company uses 810 units of a part each year. The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $4.
Refer to the Figure.What is the EOQ for Benton?

A)20
B)30
C)45
D)162

Question 46

Stosho Company incurred the following costs in manufacturing desk calculators:
During the period, the company produced and sold 2,000 units.
$$\begin{array} { l r } \text { Direct materials } & \$ 28 \\\text { Indirect materials (variable) } & 8 \\\text { Direct labour } & 16 \\\text { Indirect labour (variable) } & 12 \\\text { Other variable factory overhead } & 20 \\\text { Fixed factory overhead } & 56 \\\text { Variable selling expenses } & 40 \\\text { Fixed selling expenses } & 28\end{array}$$

-Refer to the Figure.What is the inventory cost per unit using absorption costing?

A)$32
B)$84
C)$104
D)$140

Question 47

Raymond Company reported the following units of production and sales for June and July:
Net income under absorption costing for June was $40,000; net income under variable costing for July was $50,000. Fixed manufacturing costs were $600,000 for each month.
Refer to the Figure.What was the net income for July using absorption costing?

A)$20,000
B)$40,000
C)$50,000
D)$80,000

Question 48

Westwood Company has the following information the current year:
Eastwood had no beginning inventories.
$\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable production costs } & \$ 80 \text { per unit produced } \\\text { Variable selling and administrative expenses } & \$ 32 \text { per unit sold } \\\text { Fixed production costs } & \$ 400,000 \\\text { Fixed selling and administrative expenses } & \$ 280,000 \\\text { Units produced } & 20,000 \text { units } \\\text { Units sold } & 16,000 \text { units }\end{array}$

-Refer to the Figure.What is the ending inventory for Westwood using the absorption costing method?

A)$80,000
B)$120,000
C)$180,000
D)$400,000

Question 49

The following information pertains to Nute Corporation:
$$\begin{array} { l r } \text { Beginning inventory } & 1,000 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 40 \\\text { Direct materials per unit } & 20 \\\text { Variable overhead per unit } & 10 \\\text { Fixed overhead per unit } & 30 \\\text { Variable selling and administrative costs per unit } & 6 \\\text { Fixed selling and administrative costs per unit } & 14\end{array}$$

-Refer to the Figure.What is the value of the ending inventory using the absorption costing method?

A)$240,000
B)$360,000
C)$420,000
D)$600,000

Question 50

Raymond Company reported the following units of production and sales for June and July:
Net income under absorption costing for June was $40,000; net income under variable costing for July was $50,000. Fixed manufacturing costs were $600,000 for each month.
Refer to the Figure.What was the net income for June using variable costing?

A)($40,000)
B)($20,000)
C)$20,000
D)$40,000

Question 51

Westwood Company has the following information the current year:
Eastwood had no beginning inventories.
$\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable production costs } & \$ 80 \text { per unit produced } \\\text { Variable selling and administrative expenses } & \$ 32 \text { per unit sold } \\\text { Fixed production costs } & \$ 400,000 \\\text { Fixed selling and administrative expenses } & \$ 280,000 \\\text { Units produced } & 20,000 \text { units } \\\text { Units sold } & 16,000 \text { units }\end{array}$

-Refer to the Figure.What is the cost of ending inventory for Westwood using the variable costing method?

A)$80,000
B)$120,000
C)$180,000
D)$320,000

Question 52

Westwood Company has the following information the current year:
Eastwood had no beginning inventories.
$\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable production costs } & \$ 80 \text { per unit produced } \\\text { Variable selling and administrative expenses } & \$ 32 \text { per unit sold } \\\text { Fixed production costs } & \$ 400,000 \\\text { Fixed selling and administrative expenses } & \$ 280,000 \\\text { Units produced } & 20,000 \text { units } \\\text { Units sold } & 16,000 \text { units }\end{array}$

-Refer to the Figure.What is the net income for Westwood using the variable costing method?

A)$412,000
B)$480,000
C)$600,000
D)$1,200,000

Question 53

Theele Corporation has the following information for April, May, and June:
Production costs per unit (based on 10,000 units) are as follows:
$\begin{array}{lrrr} & \text { April } & \underline{\text { May }} & \text { June } \\\text { Units produced } & 10,000 & 10,000 & 10,000 \\\text { Units sold } & 7,000 & 8,500 & 10,500\end{array}$ Theele Corporation had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months.
$\begin{array}{lr}\text { Direct materials } & \$ 13 \\\text { Direct labour } & 9 \\\text { Variable factory overhead } & 7 \\\text { Fixed factory overhead } & 5 \\\text { Variable selling and administrative expenses } & 10 \\\text { Fixed selling and administrative expenses } & 4\end{array}$

-Refer to the Figure.What is the June ending inventory for Theele Corporation when using the variable costing method?

A)$15,000
B)$116,000
C)$120,000
D)$260,000

Question 54

Operating Company has the following information pertaining to its two divisions for the current year:
Common expenses are $50,000 for the current year.
$\begin{array}{lrr}&\text { North Division }&\text { South Division}\\\text { Variable selling and administrative expenses } & \$ 70,000 & \$ 90,000 \\\text { Direct fixed manufacturing expenses } & 35,000 & 100,000 \\\text { Sales } & 300,000 & 500,000 \\\text { Direct fixed selling and administrative expenses } & 30,000 & 70,000 \\\text { Variable manufacturing expenses } & 40,000 & 100,000\end{array}$

-Refer to the Figure.What is the segment margin for Division South?

A)$140,000
B)$210,000
C)$240,000
D)$310,000

Question 55

Theele Corporation has the following information for April, May, and June:
Production costs per unit (based on 10,000 units) are as follows:
$\begin{array}{lrrr} & \text { April } & \underline{\text { May }} & \text { June } \\\text { Units produced } & 10,000 & 10,000 & 10,000 \\\text { Units sold } & 7,000 & 8,500 & 10,500\end{array}$ Theele Corporation had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months.
$\begin{array}{lr}\text { Direct materials } & \$ 13 \\\text { Direct labour } & 9 \\\text { Variable factory overhead } & 7 \\\text { Fixed factory overhead } & 5 \\\text { Variable selling and administrative expenses } & 10 \\\text { Fixed selling and administrative expenses } & 4\end{array}$

-Refer to the Figure.What is the May contribution margin for Theele Corporation when using the variable costing method?

A)$136,000
B)$170,000
C)$204,000
D)$240,000

Question 56

Stosho Company incurred the following costs in manufacturing desk calculators:
During the period, the company produced and sold 2,000 units.
$$\begin{array} { l r } \text { Direct materials } & \$ 28 \\\text { Indirect materials (variable) } & 8 \\\text { Direct labour } & 16 \\\text { Indirect labour (variable) } & 12 \\\text { Other variable factory overhead } & 20 \\\text { Fixed factory overhead } & 56 \\\text { Variable selling expenses } & 40 \\\text { Fixed selling expenses } & 28\end{array}$$

-Refer to the Figure.What is the inventory cost per unit using variable costing?

A)$42
B)$52
C)$62
D)$84

Question 57

The following information pertains to Shark Corporation:
$$\begin{array} { l r } \text { Beginning inventory } & 0 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 2022 \\\text { Direct materials per unit } & 1618 \\\text { Variable overhead per unit } & 48 \\\text { Fixed overhead per unit } & 1012 \\\text { Variable selling costs per unit } & 1214 \\\text { Fixed selling costs per unit } & 1618\end{array}$$

-Refer to the Figure.What is the relationship between absorption-costing net income and variable-costing net income?

A)Absorption-costing net income is $72,000 less.
B)Absorption-costing net income is $70,000 less.
C)Absorption-costing net income is $72,000 greater.
D)Absorption-costing net income is $70,000 greater.

Question 58

The following information pertains to Nute Corporation:
$$\begin{array} { l r } \text { Beginning inventory } & 1,000 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 40 \\\text { Direct materials per unit } & 20 \\\text { Variable overhead per unit } & 10 \\\text { Fixed overhead per unit } & 30 \\\text { Variable selling and administrative costs per unit } & 6 \\\text { Fixed selling and administrative costs per unit } & 14\end{array}$$

-Refer to the Figure.What is the value of the ending inventory using the variable costing method?

A)$240,000
B)$350,000
C)$360,000
D)$420,000

Question 59

Westwood Company has the following information the current year:
Eastwood had no beginning inventories.
$\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable production costs } & \$ 80 \text { per unit produced } \\\text { Variable selling and administrative expenses } & \$ 32 \text { per unit sold } \\\text { Fixed production costs } & \$ 400,000 \\\text { Fixed selling and administrative expenses } & \$ 280,000 \\\text { Units produced } & 20,000 \text { units } \\\text { Units sold } & 16,000 \text { units }\end{array}$

-Refer to the Figure.What is the net income for Westwood using the absorption costing method?

A)$452,000
B)$480,000
C)$600,000
D)$2,088,000

Question 60

Theele Corporation has the following information for April, May, and June:
Production costs per unit (based on 10,000 units) are as follows:
$\begin{array}{lrrr} & \text { April } & \underline{\text { May }} & \text { June } \\\text { Units produced } & 10,000 & 10,000 & 10,000 \\\text { Units sold } & 7,000 & 8,500 & 10,500\end{array}$ Theele Corporation had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months.
$\begin{array}{lr}\text { Direct materials } & \$ 13 \\\text { Direct labour } & 9 \\\text { Variable factory overhead } & 7 \\\text { Fixed factory overhead } & 5 \\\text { Variable selling and administrative expenses } & 10 \\\text { Fixed selling and administrative expenses } & 4\end{array}$

-Refer to the Figure.What is the April ending inventory for Theele Corporation when using the variable costing method?

A)$87,000
B)$90,000
C)$108,000
D)$260,000

Question 61

Assume the following information for Green Bluff's #1 Product Line:
$$\begin{array} { l r } \text { Sales } & \$ 600,000 \\\text { Variable manufacturing expenses } & 120,000 \\\text { Direct fixed manufacturing expenses } & 75,000 \\\text { Variable selling and administrative expenses } & 65,000 \\\text { Direct fixed selling and administrative expenses } & 60,000\end{array}$$

-Refer to the Figure.What is the segment margin of the product line?

A)$280,000
B)$325,000
C)$350,000
D)$400,000

Question 62

If the number of units produced in a period is smaller than the number of units sold in period,absorption costing income will be higher than variable costing income.

Question 63

Fellow's Manufacturing Company produces three products: X,Y,and Z.The income statement for this year is as follows:
The sales,contribution margin ratios,and direct fixed expenses for the three types of products are as follows:
Required: Prepare income statements segmented by products.Include a column for the entire firm in the statement.

Question 64

Inventory under absorption costing includes direct materials,direct labour,variable factory overhead,and fixed factory overhead.

Question 65

Operating Company has the following information pertaining to its two divisions for the current year:
Common expenses are $50,000 for the current year.
$\begin{array}{lrr}&\text { North Division }&\text { South Division}\\\text { Variable selling and administrative expenses } & \$ 70,000 & \$ 90,000 \\\text { Direct fixed manufacturing expenses } & 35,000 & 100,000 \\\text { Sales } & 300,000 & 500,000 \\\text { Direct fixed selling and administrative expenses } & 30,000 & 70,000 \\\text { Variable manufacturing expenses } & 40,000 & 100,000\end{array}$

-Refer to the Figure.What is the net income for Operating Company?

A)$41,000
B)$65,000
C)$215,000
D)$325,000

Question 66

Product cost includes all costs of the company.

Question 67

Birdd Company uses 450 units of a part each year.The cost of placing one order is $10; the cost of carrying one unit in inventory for a year is $2.Birdd currently orders 90 units at a time.

Question 68

Cara Company has the following information pertaining to its two divisions for the current year:
Common expenses are $18,000 for the current year.
$\begin{array}{lrr}&\text { European } & \text { American } \\&\text { Division } & \text { Division }\\\text { Variable selling and administrative expenses } & \$ 40,000 & \$ 55,000 \\\text { Direct fixed manufacturing expenses } & 22,000 & 60,000 \\\text { Sales } & 120,000 & 220,000 \\\text { Direct fixed selling and administrative expenses } & 18,000 & 45,000 \\\text { Variable manufacturing expenses } & 25,000 & 55,000\end{array}$

-Refer to the Figure.What is the segment margin for American Division?

A)$5,000
B)$55,000
C)$105,000
D)$155,000

Question 69

Assume the following information for Green Bluff's #1 Product Line:
$$\begin{array} { l r } \text { Sales } & \$ 600,000 \\\text { Variable manufacturing expenses } & 120,000 \\\text { Direct fixed manufacturing expenses } & 75,000 \\\text { Variable selling and administrative expenses } & 65,000 \\\text { Direct fixed selling and administrative expenses } & 60,000\end{array}$$

-Refer to the Figure.What is the contribution margin of the product line?

A)$215,000
B)$325,000
C)$415,000
D)$480,000

Question 70

If the number of units produced in a period is larger than the number of units sold in a period,absorption costing income will be higher than variable costing income.

Question 71

Cara Company has the following information pertaining to its two divisions for the current year:
Common expenses are $18,000 for the current year.
$\begin{array}{lrr}&\text { European } & \text { American } \\&\text { Division } & \text { Division }\\\text { Variable selling and administrative expenses } & \$ 40,000 & \$ 55,000 \\\text { Direct fixed manufacturing expenses } & 22,000 & 60,000 \\\text { Sales } & 120,000 & 220,000 \\\text { Direct fixed selling and administrative expenses } & 18,000 & 45,000 \\\text { Variable manufacturing expenses } & 25,000 & 55,000\end{array}$

-Refer to the Figure.What is the net income for Cara Company?

A)$2,000
B)$32,500
C)$150,000
D)$300,000

Question 72

Absorption costing income statements and variable costing income statements may differ because of their treatment of fixed overhead costs.

Question 73

A major advantage to the JIT inventory approach is that it decreases carrying costs.

Question 74

JIT relies on a push system to control finished goods inventory.

Question 75

Darker Company produced 30,000 units and sold 28,000 units in the current year.Beginning inventory was zero.During the period,the following costs were incurred:
Required: Compute the dollar amount of ending inventory using:

Question 76

The costs of NOT having a product available when demanded by a customer are called setup costs.

Question 77

The variable costing income statement for Kilem Company for this year is as follows:
Selected data for this year concerning the operations of the company are as follows:
Required: Prepare an absorption costing income statement for this year.

Question 78

Inventory costs under variable costing include only direct materials,direct labour,and fixed factory overhead.

Question 79

Total inventory-related cost consists of ordering cost and carrying cost.

Question 80

On a segmented income statement,fixed costs are broken down into direct fixed costs and overall fixed costs.