ACCOUNTING #3 Chapter 6 Test Bank

Under variable costing, product costs consist of direct materials, direct labor, and variable manufacturing overhead. - ANS-True Under absorption costing, fixed manufacturing overhead is treated as a product cost. - ANS-True Under variable costing, variable production costs are not treated as product costs. - ANS-False Under variable costing, fixed manufacturing overhead cost is not treated as a product cost. - ANS-True The costs assigned to units in inventory are typically lower under variable costing than under absorption costing. - ANS-True Direct materials is considered to be a product cost under variable costing but not absorption costing. - ANS-False Under absorption costing, fixed manufacturing overhead cost is not included in product cost. - ANS-False Under variable costing, product cost does not contain any fixed manufacturing overhead cost. - ANS-True Under conventional absorption costing, the fixed costs associated with idle production capacity are not included as part of the product cost. - ANS-False Under absorption costing, the profit for a period is affected by a change in the number of units of finished goods in inventory. - ANS-True When variable costing is used, and if selling prices exceed variable expenses and if the unit contribution margins, the sales mix, and fixed costs remain the same, profits move in the same direction as sales. - ANS-True Because absorption costing emphasizes costs by behavior, it works well with costvolume-profit analysis. - ANS-False Net operating income is affected by the number of units produced when absorption costing is used. - ANS-True Under absorption costing, it is possible to defer a portion of the fixed manufacturing overhead costs of the current period to future periods through the inventory account. - ANS-True When the number of units in work in process and finished goods inventories decrease, absorption costing net operating income will typically be greater than variable costing net operating income. - ANS-False A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments - ANS-False Common fixed costs should not be charged to the individual segments when preparing a segmented income statement. - ANS-True A common fixed cost is a fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated - ANS-False Segment margin is a better measure of the long-run profitability of a segment than contribution margin. - ANS-True A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory 0 Units produced 4,350 Units sold 4,250 Units in ending inventory 100 Variable costs per unit: Direct materials $ 48 Direct labor $ 50 Variable manufacturing overhead $ 13 Variable selling and administrative $ 11 Fixed costs: Fixed manufacturing overhead $ 91,350 Fixed selling and administrative $ 42,500 What is the variable costing unit product cost for the month? - ANS-$111 per unit Direct materials $ 48 Direct labor 50 Variable manufacturing overhead 13 Variable costing unit product cost $ 111 Bartelt Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 10,300 Variable costs per unit: Direct materials $90 Direct labor $71 Variable manufacturing overhead $4 Variable selling and administrative expense $12 Fixed costs: Fixed manufacturing overhead $360,500 Fixed selling and administrative expense $813,700 There were no beginning or ending inventories. The absorption costing unit product cost was: - ANS-$200 per unit Direct materials $ 90 Direct labor 71 Variable manufacturing overhead 4 Fixed manufacturing overhead ($360,500 ÷ 10,300 units) 35 Absorption costing unit product cost $ 200 A company produces a single product. Variable production costs are $13.0 per unit and variable selling and administrative expenses are $4.0 per unit. Fixed manufacturing overhead totals $46,000 and fixed selling and administration expenses total $50,000. Assuming a beginning inventory of zero, production of 5,000 units and sales of 4,100 units, the dollar value of the ending inventory under variable costing would be: - ANS- $11,700 Units in ending inventory = Units in beginning inventory + Units produced − Units sold = 0 units + 5,000 units − 4,100 units = 900 units Value of ending inventory under variable costing = Unit in ending inventory × Variable production cost = 900 units × $13.0 per unit = $11,700 A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $163 Units in beginning inventory 0 Units produced 10,600 Units sold 9,800 Units in ending inventory 800 Variable costs per unit: Direct materials $52...