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Exam 6: Variable Costing and Analysis

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Question 101

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How does contribution margin differ from gross margin?

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Contribution margin equals sales less va...

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Question 102

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Given Advanced Company's data, and the knowledge that the product is sold for $50 per unit and operating expenses are $200,000, compute the net income under variable costing.

A) $55,000
B) $67,500
C) $80,500
D) $122,500
E) $205,000

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

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Question 103

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Given the following data, total product cost per unit under absorption costing is $11.40.

________ is the amount remaining from sales revenues after cost of goods sold has been deducted.

________ is the amount remaining from sales revenues after all variable expenses have been deducted.

Given the Galaxy, Inc. data, what is net income using absorption costing?

Given Advanced Company's data, compute cost of finished goods in inventory under variable costing.

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 contribution margin for the company.

It is not possible to convert reports prepared using variable costing to absorption costing reports.

On a contribution margin income statement, expenses are grouped according to ________.

Variable costing is required by Generally Accepted Accounting Principles (GAAP) for financial statement purposes.

Which of the following would be a line item for a variable costing income statement?

Assume a company sells a given product for $95 per unit. Variable selling costs are $24.25 per unit and variable production costs are $53.50 per unit. If the company breaks even when selling 260,000 units, what are total fixed costs?

What is a contribution margin report?

Special order decisions should be made using variable costing because:

A company normally sells a product for $25 per unit. Variable per unit costs for this product are: $3 direct materials, $5 direct labor, and $2 variable overhead. The company is currently operating at 100% of capacity producing 30,000 units per year. Total fixed costs are $75,000 per year. The company should accept a special order for 1,000 units which would be sold for $13 per unit because the special order price exceeds variable costs.

Castaway Company reports the following first year production cost information: a. Determine the net income using variable costing. b. Determine the net income using absorption costing.

Variable costing is the only acceptable basis for both external reporting and tax reporting.

How can the use of absorption costing result in overproduction?

Under absorption costing, a company had the following unit costs when 8,000 units were produced. Compute the total production cost per unit under variable costing if 25,000 units had been produced.