Chapter 6 Quiz Flashcards
When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will:
A) Remain constant.
B) Be greater than net operating income under absorption costing.
C) Fluctuate in direct proportion to changes in production.
D) Fluctuate inversely with changes in production.
Remain constant.
A reason why absorption costing income statements are sometimes difficult to interpret is that:
A) They shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.
B) They ignore inventory levels in determining cost of goods sold.
C) They include all fixed manufacturing overhead on the income statement each year as a period cost.
D) They omit variable expenses entirely in computing net operating income.
They shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.
Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price $90
Units in beginning inventory 0
Units produced 3,400
Units sold 3,000
Units in ending inventory 400
Variable costs per unit:
Direct materials $21
Direct labor $38
Variable manufacturing overhead $6
Variable sell & admin expense $4
Fixed costs:
Fixed manufacturing overhead $54,400
Fixed sell & admin expense $3,000
The total contribution margin for the month under variable costing is:
A) $63,000
B) $27,000
C) $8,600
D) $75,000
$63,000
Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price $90
Units in beginning inventory 0
Units produced 3,400
Units sold 3,000
Units in ending inventory 400
Variable costs per unit:
Direct materials $21
Direct labor $38
Variable manufacturing overhead $6
Variable sell & admin expense $4
Fixed costs:
Fixed manufacturing overhead $54,400
Fixed sell & admin expense $3,000
The total gross margin for the month under the absorption costing approach is:
A) $59,400
B) $12,000
C) $63,000
D) $27,000
$27,000
Beach Corporation, which produces a single product, budgeted the following costs for its first year of operations. These costs are based on a budgeted volume of 30,000 towels produced and sold:
Direct materials $96,000
Direct labor $48,000
Variable manufacturing overhead $72,000
Fixed manufacturing overhead $60,000
Variable sell & admin expenses $12,000
Fixed sell & admin expenses $36,000
During the first year of operations, Beach Corporation actually produced 30,000 towels but only sold 24,000 towels. Actual costs did not fluctuate from the cost behavior patterns described above. The 24,000 towels were sold for $16 per towel. Assume that direct labor is a variable cost.
What is the total cost that would be assigned to Beach Corporation’s finished goods inventory at the end of the first year of operations under variable costing?
A) $45,600
B) $55,200
C) $64,800
D) $43,200
$43,200
All other things equal, if a division’s traceable fixed expenses decrease:
A) The division’s segment margin will increase.
B) The overall company net operating income will decrease.
C) The division’s contribution margin will increase.
D) The division’s sales volume will increase.
The division’s segment margin will increase.
Colasuonno Corporation has two divisions: the West Division and the East Division. The corporation’s net operating income is $88,800. The West Division’s divisional segment margin is $39,500 and the East Division’s divisional segment margin is $166,900. What is the amount of the common fixed expense not traceable to the individual divisions?
A) $255,700
B) $206,400
C) $117,600
D) $128,300
$117,600
