NonieM posted a question
1. Under variable costing, which of the following costs would not be included in finished goods inventory?
A) Wages of machine operator
B) Steel costs for a machine tool manufacturer
C) Salary of factory supervisor
D) Oil costs used to lubricate machinery
2. Under absorption costing, the cost of finished goods includes direct materials, direct labor, and factory overhead.
A) True
B) False
3. For a period during which the quantity of inventory at the end was smaller 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
4. Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affects the amount of income from operations reported under absorption costing.
A) True
B) False
5. 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
6. In the absorption costing income statement, deduction of the cost of goods sold from sales yields gross profit.
A) True
B) False
7. 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
8. On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.
A) True
B) False
9. Companies prepare contribution margin reports by market segments and product segments because products contribute to profitability in various ways.
A) True
B) False
10. The contribution margin and the manufacturing margin are usually equal.
A) True
B) False
11. A business operated at 100% of capacity during its first month, with the following results:

Sales (80 units) $80,000
Production costs (100 units):
Direct materials $50,000
Direct labor 10,000
Variable factory overhead 5,000
Fixed factory overhead 2,000 67,000

Operating expenses:
Variable operating expenses $ 6,000
Fixed operating expenses 1,000 7,000



What is the amount of the income from operations that would be reported on the absorption costing income statement?
A) $21,000
B) $19,400
C) $22,000
D) $28,000
12. For a period during which the quantity of product manufactured was less than the quantity sold, income from operations reported under absorption costing will be smaller than income from operations reported under variable costing.
A) True
B) False
13. A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (5,000 units):
Direct materials $70,000
Direct labor 20,000
Variable factory overhead 10,000
Fixed factory overhead 2,000 $102,000

Operating expenses:
Variable operating expenses $17,000
Fixed operating expenses 1,000 18,000


If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be the amount of income from operations reported on the absorption costing income statement?
A) $50,400
B) $50,000
C) $52,000
D) $70,000
14. Contribution margin reporting can be beneficial for analyzing the following:
A) Sales personal
B) Products
C) Sales Territory
D) All of the above.
15. Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable factory overhead.
A) True
B) False
16. Under absorption costing, the amount of income reported from operations can be increased by producing more units than are sold.
A) True
B) False
17. Under absorption costing, increases or decreases in income from operations due to changes in inventory levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.
A) True
B) False
18. In the short run, the selling price of a product should normally not be less than the variable costs and expenses of making and selling it.
A) True
B) False
19. Variable costing is also known as direct costing.
A) True
B) False
20. Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable factory overhead.
A) True
B) False
21. For a period during which the quantity of inventory at the end equals the inventory 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
22. Companies prepare contribution margin reports by market segments and product segments because products contribute to profitability in various ways.
A) True
B) False
23. The difference between the planned and actual contribution margin can be caused by:
A) an increase or decrease in the amount of sales
B) an increase in the amount of variable costs and expenses
C) a decrease in the amount of variable costs and expenses
D) A, B, or C
24. 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
25. The factory superintendent's salary would be included as part of the cost of products manufactured under the variable costing concept.
A) True
B) False
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