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Exam 6: Variable Costing for Management Analysis

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Question 1

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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:

A) $20,500 increase
B) $20,000 decrease
C) $20,500 decrease
D) $20,000 increase

E) A) and C)
F) A) and B)

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A

Question 2

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The contribution margin and the manufacturing margin are usually equal.

A) True
B) False

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Question 3

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If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is profitable to increase the sales of that product with the highest contribution margin.

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

The following data are for Trendy Fashion Apparel: Determine the contribution margin for: (a) Skirts (b) the South Region.

Under variable costing, which of the following costs would not be included in finished goods inventory?

Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis report for the year ended December 31.

Under variable costing, which of the following costs would be included in finished goods inventory?

A business operated at 100% of capacity during its first month, with the following results: What is the amount of the income from operations that would be reported on the absorption costing income statement?

Philadelphia Company has the following information for March: Determine the March (a) manufacturing margin (b) contribution margin (c) income from operations for Philadelphia Company.

Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?

Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.

Matching

In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the changes in various activities.

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

For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?

A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement?

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.

A business operated at 100% of capacity during its first month and incurred the following costs: If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?