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In a service firm, it may be necessary to have several activity bases to properly match the change in costs with the changes in various activities.

A) True
B) False

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

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What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?


A) Standard costing
B) Variable costing
C) Absorption costing
D) Marginal costing

E) A) and C)
F) All of the above

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Matching

Premises
Treats fixed manufacturing cost as a period cost.
May be used in a manufacturing company.
Treats fixed selling cost as a period cost.
Generally provides the most useful report for controlling costs.
Includes gross profit on the income statement.
Operating income is impacted by changes in inventory level.
Required by generally accepted accounting principles.
Generally provides the most useful report for setting long-term prices.
Responses
Absorption costing only
Both absorption and variable costing
Variable costing only

Correct Answer

Treats fixed manufacturing cost as a period cost.
May be used in a manufacturing company.
Treats fixed selling cost as a period cost.
Generally provides the most useful report for controlling costs.
Includes gross profit on the income statement.
Operating income is impacted by changes in inventory level.
Required by generally accepted accounting principles.
Generally provides the most useful report for setting long-term prices.

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:


A) $20,500 increase
B) $20,000 decrease
C) $20,500 decrease
D) $20,000 increase

E) A) and B)
F) B) and D)

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A

A business operated at 100% of capacity during its first month, with the following results: A business operated at 100% of capacity during its first month, with the following results: What is the amount of the income from operations that would be reported on the absorption costing income statement? A) $21,000 B) $18,900 C) $18,200 D) $27,900 What is the amount of the income from operations that would be reported on the absorption costing income statement?


A) $21,000
B) $18,900
C) $18,200
D) $27,900

E) A) and B)
F) B) and D)

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B

Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.

A) True
B) False

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For short-run production planning, information in the absorption costing format is more useful to management than is information in the variable costing format.

A) True
B) False

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In the absorption costing income statement, deduction of the cost of goods sold from sales yields contribution margin.

A) True
B) False

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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) True
B) False

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Under which inventory costing method could increases or decreases in income from operations be misinterpreted to be the result of operating efficiencies or inefficiencies?


A) only variable costing
B) only absorption costing
C) both variable and absorption costing
D) neither variable nor absorption costing

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

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A business operated at 100% of capacity during its first month and incurred the following costs: A business operated at 100% of capacity during its first month and incurred the following costs: If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement? A) $100,800 B) $100,000 C) $114,800 D) $140,000 If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be the amount of income from operations reported on the variable costing income statement?


A) $100,800
B) $100,000
C) $114,800
D) $140,000

E) None of the above
F) A) and D)

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


A) Absorption costing should be used to determine routine pricing which includes both fixed and variable costs.
B) As long as the selling price is set above the variable costs, the company will make a profit in short run.
C) Variable costing is effective when determining short run decisions, but absorption costing is only used for long-term pricing policies.
D) Both variable and absorption pricing plans should be considered, to include several pricing alternatives.

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

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


A) neither variable nor fixed factory overhead cost
B) both variable and fixed factory overhead cost
C) only variable factory overhead cost
D) only fixed factory overhead cost

E) A) and D)
F) C) and D)

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Under variable costing, which of the following costs would not be included in finished goods inventory?


A) direct labor cost
B) direct materials cost
C) variable factory overhead cost
D) fixed factory overhead cost

E) A) and B)
F) All of the above

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

A) True
B) False

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The following data are for Trendy Fashion Apparel: The following data are for Trendy Fashion Apparel: Determine the contribution margin for: (a) Skirts (b) the South Region. Determine the contribution margin for: (a) Skirts (b) the South Region.

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The contribution margin and the manufacturing margin are usually equal.

A) True
B) False

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A business operated at 100% of capacity during its first month and incurred the following costs: A business operated at 100% of capacity during its first month and incurred the following costs: If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement? A) $51,400 B) $52,000 C) $54,000 D) $53,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement?


A) $51,400
B) $52,000
C) $54,000
D) $53,000

E) A) and D)
F) A) and C)

Correct Answer

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Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis report for the year ended December 31. Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin analysis report for the year ended December 31.

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