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Exam 20: Variable Costing for Management Analysis

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Question 1

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In contribution margin analysis, the quantity factor is computed as the difference between actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.

A) True
B) False

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Question 2

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MATCHING -Operating income is impacted by changes in inventory level.

A) Absorption costing only
B) Variable costing only
C) Both absorption and variable costing

D) A) and B)
E) None of the above

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Question 3

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In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in unit sales price or cost, is termed the quantity factor.

If sales totaled $800,000 for the year 80,000 units at $10.00 each) and the planned sales totaled $799,500 78,000 units at $10.25 each) , the effect of the quantity factor on the change in sales is:

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be smaller than income from operations reported under absorption costing.

The level of inventory of a manufactured product has increased by 7,000 units during a period. The following data are also available: What would be the effect on income from operations if absorption costing is used rather than variable costing?

Sales mix is generally defined as the relative distribution of sales among the various products sold.

For a period during which the quantity of inventory at the end was larger than that at the beginning, income from operations reported under variable costing will be larger than income from operations reported under absorption costing.

A change in the amount of sales can be due to either a change in the units sold or a change in price or both.

The contribution margin and the manufacturing margin are usually equal.

On the variable costing income statement, variable costs are deducted from contribution margin to yield manufacturing margin.

Electricity purchased to operate factory machinery would be included as part of the cost of products manufactured under the absorption costing concept.

Fixed costs are $50 per unit and variable costs are $125 per unit. Production was 130,000 units, while sales were 125,000 units. Determine a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and b) the difference in variable costing and absorption costing income from operations.

Which of the following causes the difference between the planned and actual contribution margin?

On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.

If variable cost of goods sold totaled $90,000 for the year 18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 16,000 units at $5.40 each) , the effect of the quantity factor on the change in contribution margin is:

On what effects does contribution margin analysis focus?

In the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit.

Which of the following would not be an appropriate activity base for cost analysis in a service firm?

Which of the following is not true when determining the selling price for a product?