Question 1

In absorption costing,fixed manufacturing overhead is expensed ________.

Accepted Answer

In absorption costing, fixed manufacturing overhead is a product cost and is included in the cost of each unit produced. It is expensed when the product is sold, along with the direct materials, direct labor, and variable manufacturing overhead costs that are also included in the cost of each unit.

Question 2

Under absorption costing,operating profit can be ________.

Accepted Answer

Under absorption costing, fixed manufacturing overhead is allocated to each unit produced. By increasing production, more fixed costs are spread over more units, reducing the cost per unit and increasing operating profit, even if sales do not increase.

Question 3

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

The answer of E-trax Inc.has provided the following financial information...

Question 4

Danby Inc.has the following cost data:
  Calculate the unit product cost using absorption costing when production is 200 units,400 units,and 800 units.

Accepted Answer

The answer of Danby Inc.has the following cost data:
 ...

Question 5

The ________ method allows managers to manipulate operating profits through production.

Accepted Answer

Absorption costing is a method of accounting that assigns all of the costs associated with manufacturing a product to the product itself. This includes direct and indirect costs such as labor, materials, and overhead. By manipulating the volume of production, managers can control the amount of overhead costs allocated to each unit, which affects the operating profits of the company. The other three methods listed (B) variable costing, (C) direct costing, and (D) marginal costing do not allow for this type of manipulation of operating profits through production.

Question 6

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 number of units produced during 2014.

Accepted Answer

Operating profit under absorption costing includes fixed manufacturing overhead expenses, which is not the case in variable costing. The difference in operating profit is equal to the fixed manufacturing overhead expenses, which is calculated by multiplying the number of units produced during the year by the fixed overhead rate.

Therefore, using the given information, we can calculate the fixed overhead rate as follows:

Fixed manufacturing overhead = Operating profit under absorption costing – Operating profit under variable costing
Fixed manufacturing overhead = $11,250 - $9,270
Fixed manufacturing overhead = $1,980

Fixed overhead rate = Fixed manufacturing overhead ÷ Number of units produced
Fixed overhead rate = $1,980 ÷ Number of units produced

To calculate the number of units produced, we need to find out the point at which the fixed cost is absorbed into the cost of goods sold. This point is where the number of units sold equals the number of units produced.

Let's assume that the selling price per unit was $20 and the variable cost per unit was $12. Using this information, we can calculate the contribution margin per unit as follows:

Contribution margin per unit = Selling price per unit – Variable cost per unit
Contribution margin per unit = $20 - $12
Contribution margin per unit = $8

Therefore, to absorb the fixed overhead cost of $1,980, Groovelex Inc. needs to sell:

Number of units sold = Fixed manufacturing overhead ÷ Contribution margin per unit
Number of units sold = $1,980 ÷ $8
Number of units sold = 247.5 units (rounded to the nearest whole number)

Since there were no beginning inventories, the total number of units produced during 2014 is equal to the number of units sold, which is 247.5 units rounded up to the nearest whole number, which is 248 units.

Question 7

Groovelex Inc.has collected the following data for the current year:  What is the unit product cost for the current year using absorption costing?

Accepted Answer

In absorption costing, the unit product cost includes both variable and fixed manufacturing overhead costs. We can calculate the unit product cost using the following formula:

Unit product cost = (Total manufacturing cost + Total variable selling and administrative expenses) / Total units produced

Substituting the given values:

Unit product cost = (640,000 + 224,000) / 10,000
Unit product cost = 86

Therefore, the unit product cost using absorption costing is $86, which is closest to option C ($80).

Question 8

Silver Rex Inc.has provided the following data for the year 2015:
  Requirements:
a)What is Silver Rex's product cost under absorption costing and variable costing?
b)Prepare income statements for Silver Rex using absorption costing and variable costing.
c)Calculate the balance in Finished Goods Inventory using absorption costing and variable costing.
Assume that the production and prices were the same in the previous year.

Accepted Answer

The answer of Silver Rex Inc.has provided the following data...

Question 9

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

The difference between the operating profits calculated using variable costing and absorption costing is equal to the fixed manufacturing overhead expensed under variable costing. Therefore, the total fixed manufacturing overhead that will be expensed under variable costing for the year 2014 is $11,250 - $9,270 = $1,980.

Question 10

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

Under just-in-time inventory systems, inventory levels are minimal, so the difference between absorption and variable costing on operating profit is minimal.

Question 11

Oxygen Inc.reports the following information:
  Assume that the production and prices were the same in the previous year.Assume no beginning inventories.
Requirements:
a)Calculate unit cost of product using absorption costing and variable costing.
b)Calculate the operating income using absorption costing and variable costing.

Accepted Answer

The answer of Oxygen Inc.reports the following information:
  Assume...

Question 12

Groovelex Inc.reports the following information:  The beginning inventory costs $3,750 under absorption costing and $2,500 under variable costing.
What is the operating income using variable costing?

Accepted Answer

11ea84d1_1175_90d0_83dc_171bdd027c76_TB3006_00 Variable Costs:
 11ea84d1_1175_90d1_83dc_8f00cb573459_TB3006_00 Fixed Costs:
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Question 13

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

Accepted Answer

When there is no beginning inventory and all produced goods are sold, operating income will be the same under both absorption and variable costing because there are no inventory changes to affect the allocation of fixed manufacturing costs.

Question 14

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 absorption costing for the year 2014.

Accepted Answer

The difference in operating profit between absorption costing and variable costing is due to the fixed manufacturing overhead included in inventory under absorption costing. The difference is $11,250 - $9,270 = $1,980. Since there were no beginning inventories, this difference represents the fixed manufacturing overhead expensed under absorption costing.

Question 15

Fasetech Inc.has collected the following data for November (there are no beginning inventories):  What is the ending balance in finished goods inventory using absorption costing if 450 units are sold?

Accepted Answer

The answer of Fasetech Inc.has collected the following data for...

Question 16

Groovelex Inc.has collected the following data for the current year:  The beginning inventory costs $3,750 under absorption costing and $2,500 under variable costing.
What is the operating income using absorption costing?

Accepted Answer

The answer of Groovelex Inc.has collected the following data for...

Question 17

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

Accepted Answer

11ea84d1_1176_0609_83dc_8b7a4e68499d_TB3006_00 Fixed manufacturing overhead
 11ea84d1_1176_060a_83dc_a782f7a967d4_TB3006_00

Question 18

Groovelex Inc.reports the following information: 
- There are no beginning inventories.What is the ending balance in finished goods inventory using variable costing?

Accepted Answer

Variable costing does not include fixed manufacturing costs in inventory. Therefore, the ending balance in finished goods inventory is $2,500 (500 units x $5).

Question 19

Groovelex Inc.reports the following information:  
-There are no beginning inventories.What is the ending balance in finished goods inventory using absorption costing?

Accepted Answer

The answer of Groovelex Inc.reports the following information:  
-There...

Question 20

Groovelex Inc.reports the following information:  What is the unit product cost using variable costing?

Accepted Answer

The answer of Groovelex Inc.reports the following information:  What...

Quiz 21: Variable Costing

In absorption costing,fixed manufacturing overhead is expensed ________.

Under absorption costing,operating profit can be ________.

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

Danby Inc.has the following cost data: Calculate the unit product cost using absorption costing when production is 200 units,400 units,and 800 units.

The ________ method allows managers to manipulate operating profits through production.

Groovelex Inc.has collected the following data for the current year: What is the unit product cost for the current year using absorption costing?

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?

Groovelex Inc.reports the following information: The beginning inventory costs $3,750 under absorption costing and $2,500 under variable costing. What is the operating income using variable costing?

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

Fasetech Inc.has collected the following data for November (there are no beginning inventories) : What is the ending balance in finished goods inventory using absorption costing if 450 units are sold?

Groovelex Inc.has collected the following data for the current year: The beginning inventory costs $3,750 under absorption costing and $2,500 under variable costing. What is the operating income using absorption costing?

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

Groovelex Inc.reports the following information: - There are no beginning inventories.What is the ending balance in finished goods inventory using variable costing?

Groovelex Inc.reports the following information: -There are no beginning inventories.What is the ending balance in finished goods inventory using absorption costing?

Groovelex Inc.reports the following information: What is the unit product cost using variable costing?