BEC 15

Question 1

When do you use variable and absorption costing methods

Answer 1

GAAP - requires absorption

Variable - Is used for internal or managerial purposes NOT permissible under GAAP

Question 2

Direct, Prime and CM costing are all what type of costing

Answer 2

Variable

Question 3

Full costing and GAAP costing are ll what type of costing

Answer 3

Absorption

Question 4

Under direct costing all fixed costs are considered what

Answer 4

period costs

Question 5

Selling costs are considered what under both absorption and variable

Answer 5

period costs - never charged to inventory

Question 6

What are the assumptions that are made during a relevant range of time

Answer 6

Fixed costs in total and variable costs per unit will remain unchanged for the range time or period

All costs and revenue are linear

Question 7

which costing method (variable, absorption, hybrid, process costing ) will have the lowest inventory value

Answer 7

Absorption

all of the others involve allocating some amount of fixed Overhead to inventory resulting in a higher inventory value

Question 8

What is included in all product costs

Answer 8

Product costs = Direct Material, Direct Labor and Factory OH

DM & DL = prime costs
DL and Foh = Conversion costs

so total costs = DL,DM, Foh

or total costs = Prime costs + Factory oh

or total costs = Conversion costs + DM

Question 9

Under the variable costing method - what costs are assigned to inventory

Answer 9

Variable factory overhead costs , DL and DM

Factory OH which includes variable factory oh is expensed immediately and is not included in inventory

Question 10

What is another way of fining contributions margin

Answer 10

Sales price - prime costs - variable OH - variable sales and admin
20 - 6 -1 - 1 = 12

Question 11

What is included in total production costs

Answer 11

Direct Labot, Direct materials, and overhead

So when you are looking for cost of ending inventory:

   Begin Inventory
\+ total production costs
= Total manufacturing costs availible
- COGS
= Ending Inventory

Question 12

What happens to net into,e under absorption costing

Answer 12

It is higher under absorption because more costs will be included in ending inventory which will decrease expense and increase net income

Question 13

Under variable costing what happens

Answer 13

ALL fixed Overhead is expensed as incurred o net income is lower

Question 14

What is ending inventory under absorption costing

Answer 14

It is higher than variable because it will include fixed OH

Question 15

Is there a difference between selling and administrative expenses under adsorption and variable costing

Answer 15

No - they are the same under both systems

Question 16

What is the formula for the predetermined variable rate

Answer 16

estimated variable overheard rates / estimated machine hours

This is predetermined at the beginning of the period therefore it uses estimated amounts

Question 17

Under the direct costing method -(variable) where do you use fixed costs

Answer 17

It is used to calculate the Operating income, but not the Contribution margin

Sales
- variable COGS
- Variable SG &A
= CM

CM
-Fixed manufacturing
-Fixed SG&A
= Operating Income

Question 18

what is the difference between normal and abnormal spoilage

Answer 18

normal is unavoidable spoilage due to the manufacturing process

This cost is ADDED to inventory account

Abnormal spoilage - this is unplanned spoilage due to a natural disaster.

It is deducted as a period expense

Question 19

What is hi/low method

Answer 19

This is to identify the variable cost per unit to find the fixed cost per unit

(high cost - lowest cost) / (most units - least units) = cost per unit

Question 20

variable costs will be the same when

fixed costs

Answer 20

they will be the same percentage of sales at any volume

Fixed cost remain constant regardless of sales volume

so at a lower sales volume - fixed costs will be a higher percentage pf sales than at a higher sales volume

Question 21

How do you account for the difference between the amount of profit reported under variable costing and absorption costing

Answer 21

This is cut to a fixed manufacturing overhead being treated as a period cost for variable and product cost for adsorption

When inventories remain the same - both methods have the same income

When inventory levels increase - more fixed overhead is included in ending inventory instead of bowing deducted from income.

Question 22

What are examples of fixed factory overhead

Answer 22

straightline depreciation