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Exam 6: Variable Costing and Analysis

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Question 31

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Under absorption costing, a company had the following unit costs when 9,000 units were produced. Compute the total product cost per unit under variable costing if 30,000 units had been produced.

A) $31.75
B) $28.25
C) $23.45
D) $15.25
E) $20.75

F) A) and C)
G) A) and E)

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Question 32

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Fields Cutlery, a manufacturer of gourmet knife sets, produced 20,000 sets and sold 23,000 units during the current year. Beginning inventory under absorption costing consisted of 3,000 units valued at $66,000 (Direct materials $12 per unit; Direct labor, $3 per unit; Variable Overhead, $2 per unit, and Fixed overhead, $5 per unit.) All manufacturing costs have remained constant over the 2-year period. At year-end, the company reported the following income statement using absorption costing: 60% of total selling and administrative expenses are variable. Compute net income under variable costing.

A) $414,000
B) $399,000
C) $529,000
D) $429,000
E) $644,000

F) B) and E)
G) None of the above

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Question 33

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Contribution margin is also known as gross margin.

[The following information applies to the questions displayed below.] Cool Pools, a manufacturer of above ground pools, began operations on January 1 of the current year. During this time, the company produced 45,000 units and sold 44,000 units at a sales price of $60 per unit. Cost information for this year is shown in the following table: -Given the Cool Pools Company data, what is net income using variable costing?

The bottom line of a contribution margin report is net income.

Since fixed costs remain constant in the short run, special orders should be accepted as long as the order price is greater than the variable costs.

Wind Fall, a manufacturer of leaf blowers, began operations this year. During this year, the company produced 10,000 leaf blowers and sold 8,500. At year-end, the company reported the following income statement using absorption costing: Production costs per leaf blower total $20, which consists of $16 in variable production costs and $4 in fixed production costs (based on the 10,000 units produced) . Fifteen percent of total selling and administrative expenses are variable. Compute net income under variable costing.

Alexis Co. reported the following information for May: What is the contribution margin for Part A?

32 Degrees, Inc., a manufacturer of frozen food, began operations on July 1 of the current year. During this time, the company produced 140,000 units and sold 140,000 units at a sales price of $125 per unit. Cost information for this period is shown in the following table: a. Prepare 32 Degree's December 31st income statement for the current year under absorption costing. b. Prepare 32 Degree's December 31st income statement for the current year under variable costing.

________ is a costing method that includes all manufacturing costs in unit product costs.

Reliance Corporation sold 4,000 units of its product at a price of $15 per unit. Total variable cost per unit is $8.50, consisting of $7.75 in variable production cost and $0.75 in variable selling and administrative cost. Compute the contribution margin for the company.

Swola Company reports the following annual cost data for its single product. This product is normally sold for $25 per unit. If Swola increases its production to 200,000 units, while sales remain at the current 75,000 unit level, by how much would the company's income increase or decrease under variable costing?

Hayes Inc. provided the following information for the current year: What is the unit product cost for the year using variable costing?

Contribution margin is the excess of sales over total variable costs.

Dataport Company reports the following annual cost data for its single product: This product is normally sold for $230 per unit. If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to increase current production.

Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table: Given this information, which of the following is true?

What is the general procedure for converting variable costing net income to absorption costing net income?

When units produced equal units sold, reported income is identical under absorption costing and variable costing.

The traditional income statement format used for financial reporting is called the contribution margin format.

Countdown Inc. sold 17,000 units of its product at a price of $81 per unit. Total variable cost per unit is $72.09, consisting of $69.05 in variable production cost and $3.04 in variable selling and administrative cost. Compute the total contribution margin.