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Exam 20: Variable Costing for Management Analysis

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Question 61

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Under absorption costing, the amount of income reported from operations can be increased by producing more units than are sold.

A) True
B) False

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Question 62

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For a period during which the quantity of product manufactured exceeded the quantity sold, income from operations reported under absorption costing will be larger than income from operations reported under variable costing.

A) True
B) False

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Question 63

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On what effects does contribution margin analysis focus?

The level of inventory of a manufactured product has increased by 5,000 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?

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

Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.

The contribution margin ratio is computed as contribution margin divided by sales.

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 unit price or unit cost factor.

The factory superintendent's salary would be included as part of the cost of products manufactured under the absorption costing concept.

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

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields manufacturing margin.

Variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000 units. (a) How much would absorption costing income from operations differ between a plan to produce 4,000 units and a plan to produce 5,000 units? (b) How much would variable costing income from operations differ between the two production plans?

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

In the contribution margin analysis, the effect of a change in the number of units sold, assuming no change in unit sales price or unit cost, is referred to as the:

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.

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet?

For a period during which the quantity of product manufactured equals the quantity sold, income from operations reported under absorption costing will be smaller than the income from operations reported under variable costing.

S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of a manufactured product remained unchanged. The manufacturing costs were as follows: Which of the following statements is true?

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

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: