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Chapter 7 (Sample Test) Blake Corporation, which produces a single product, has provided the following absorption costing income statement for the month of June: During June, the company's variable production costs were $10 per unit and its fixed manufacturing overhead totaled $60,000. A total of 10,000 units were produced during June and the company had 1,000 units in the beginning inventory. The company uses the LIFO method to value inventories. 1. The carrying value on the balance sheet of the company's inventory on June 30 under the variable costing method would be: A. $10,000 B. $12,000 C. $15,000 D. $24,000 Mediocre Manufacturing Company produces a single product. Management budgeted the following costs for its first year of operations. These costs are based on a budgeted volume of 4,000 units produced and sold: During the first year of operations, Mediocre actually produced 4,000 units but only sold 3,500 units. Actual costs did not fluctuate from the cost behavior patterns described above. The 3,500 units were sold for $72 per unit. Assume that direct labor is a variable cost. 2. Under the variable costing method, what is Mediocre's actual net operating income for its first year? A. $42,000 B. $54,250 C. $55,125 D. $63,000 3. Bellue Inc. manufactures a variety of products. Variable costing net operating income was $96,300 last year and ending inventory decreased by 2,600 units. Fixed manufacturing overhead cost was $1 per unit. What was the absorption costing net operating income last year? A. $2,600 B. $93,700 C. $96,300 D. $98,900 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: During the first year of operations, Beach Towel 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. 4. Under the absorption costing method, what is Beach Towel's actual net operating income for its first year? A. $60,000 B. $115,200 C. $117,600 D. $124,800 5. Swifton Company produces a single product. Last year, the company had net operating income of $40,000 using variable costing. Beginning and ending inventories were 22,000 and 27,000 units, respectively. If the fixed manufacturing overhead cost was $3.00 per unit, what was the income using absorption costing? A. $15,000 B. $25,000 C. $40,000 D. $55,000 6. Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that: A. variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs.... View Full Document

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