Answer the following questions using the information below:
Healesville Animates produces and sells a luxury animal pillow for $40.00 per unit.In the first month of operation,3000 units were produced and 2250 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
$\begin{array}{ll}
\text { Variable manufacturing costs } & \$ 19 \text { per unit } \
\text { Variable marketing costs } & \$ 1 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 30000 \text { per month } \
\text { Administrative expenses, all fixed } & \$ 6000 \text { per month } \
\text { Ending inventories: } &\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 750 \text { units }
\end{array}$
-When comparing the operating profits between absorption costing and variable costing,and beginning finished inventory exceeds ending finished inventory,it may be assumed that:
A)variable costing operating profit exceeds absorption costing operating profit
B)variable cost per unit is less than fixed cost per unit
C)there is an unfavourable production-volume variance
D)sales increased during the period

Question

Answer the following questions using the information below:
Healesville Animates produces and sells a luxury animal pillow for $40.00 per unit.In the first month of operation,3000 units were produced and 2250 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{ll}
\text { Variable manufacturing costs } & \$ 19 \text { per unit } \
\text { Variable marketing costs } & \$ 1 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 30000 \text { per month } \
\text { Administrative expenses, all fixed } & \$ 6000 \text { per month } \
\text { Ending inventories: } &\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 750 \text { units }
\end{array}$
-When comparing the operating profits between absorption costing and variable costing,and beginning finished inventory exceeds ending finished inventory,it may be assumed that:
A)variable costing operating profit exceeds absorption costing operating profit
B)variable cost per unit is less than fixed cost per unit
C)there is an unfavourable production-volume variance
D)sales increased during the period

Quizplus · Accepted Answer

CUnder absorption costing, both variable and fixed manufacturing costs are included in the cost of goods sold, whereas under variable costing, only variable manufacturing costs are included in the cost of goods sold. When beginning inventory is less than ending inventory, as in this case (beginning inventory is implied to be zero, and ending inventory is 750 units), absorption costing will typically show a higher operating profit than variable costing because some of the fixed manufacturing costs are allocated to the ending inventory and not expensed in the current period. This scenario does not directly imply that variable cost per unit is less than fixed cost per unit (B) or that sales increased during the period (D). An unfavorable production-volume variance (C) can occur under absorption costing when actual production differs from expected production, affecting the allocation of fixed costs, but it's not directly related to the comparison of operating profits between the two costing methods in the context provided.

Answer the Following Questions Using the Information Below: Healesville Animates

Answer the Following Questions Using the Information Below:
Healesville Animates