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Exam 5: Variable Costing for Management Analysis

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Question 71

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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 lowest contribution margin.

A) True
B) False

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Question 72

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In which of the following types of firms would it be appropriate to prepare contribution margin reporting and analysis?

A) boat manufacturing
B) a chain of beauty salons
C) home building
D) all of the above

E) A) and B)
F) B) and D)

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Question 73

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Fixed factory overhead costs are included as part of the cost of products manufactured under the absorption costing concept.

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

The level of inventory of a manufactured product has increased by 8,000 units during a period.The following data are also available: What would be the effect on income from operations if variable costing is used rather than absorption costing?

The contribution margin ratio is computed as:

Service firms can only have one activity base for analyzing changes in costs.

Managers in service firms do not find contribution margin analysis reports useful because their firms do not sell inventory.

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

During the first year of operations, 18,000 units were manufactured and 13,500 units were sold.On August 31, Olympic Inc.prepared the following income statement based on the variable costing concept: Olympic Inc. Variable Costing Income Statement For Year Ended August 31, 20-- Determine the unit cost of goods manufactured, based on a the variable costing concept and b the absorption costing concept.

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

The Excelsior Company has three salespersons.Average sales price per unit sold, average variable manufacturing costs per unit, and number of units sold for each salesperson are shown below. Commissions are earned according to the following schedule: Prepare a contribution by salesperson report.

The beginning inventory is 5,000 units.All of the units manufactured during the period and 3,000 units of the beginning inventory were sold.The beginning inventory fixed costs are $25 per unit, and variable costs are $55 per unit.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 income from operations.

Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept.

If variable selling and administrative expenses totaled $124,000 for the year 80,000 units at $1.55 each and the planned variable selling and administrative expenses totaled $136,500 78,000 units at $1.75 each, the effect of the quantity factor on the change in contribution margin is:

Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.

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

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.

For a supervisor of a manufacturing department, which of the following costs is controllable?

The systematic examination of the differences between planned and actual contribution margin is