EXAM 5 - EXAM 5 1. Mcgougan Corporation produces a single...

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EXAM 5 1. Mcgougan Corporation produces a single product and has the following cost structure: The unit product cost under variable costing is: A) $139 B) $126 C) $122 D) $127 Feedback: Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead = $81 + $40 + $5 = $126 Points Earned: 0.0/1.0 Correct Answer(s): B 2. Silver Company produces a single product. Last year, the company's variable production costs totaled $7,500 and its fixed manufacturing overhead costs totaled $4,500. The company produced 3,000 units during the year and sold 2,400 units. There were no units in the beginning inventory. Which of the following statements is true? A) Under variable costing, the units in the ending inventory will be costed at $4 each. B) The net operating income under absorption costing for the year will be $900 lower than the net operating income under variable costing. C) The ending inventory under variable costing will be $900 lower than the ending inventory under absorption costing. D) Under absorption costing, the units in ending inventory will be costed at $2.50 each. Points Earned: 0.0/1.0 Correct Answer(s): C
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3. What is the cause of the difference between absorption costing net operating income and variable costing net operating income? A) Absorption costing deducts all manufacturing costs from net operating income; variable costing deducts only prime costs. B) Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories; variable costing considers all fixed manufacturing costs to be period costs. C) Absorption costing includes variable manufacturing costs in product costs; variable costing considers variable manufacturing costs to be period costs. D) Absorption costing includes fixed administrative costs in product costs; variable costing considers fixed administrative costs to be period costs. Points Earned: 0.0/1.0 Correct Answer(s): B 4. Atlantic Company produces a single product. For the most recent year, the company's net operating income computed by the absorption costing method was $7,400, and its net operating income computed by the variable costing method was $10,100. The company's unit product cost was $17 under variable costing and $22 under absorption costing. If the ending inventory consisted of 1,460 units, the beginning inventory must have been: A) 920 units B) 1,460 units C) 2,000 units D) 12,700 units Feedback: Fixed manufacturing overhead per unit = Unit cost under absorption costing - Unit cost under variable costing = $22 - $17 = $5 Difference in income between absorption and variable costing = Fixed manufacturing overhead per unit x Change in inventory in units ($10,100 - $7,400) = $5 x Change in inventory in units Change in inventory in units = 540 units
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EXAM 5 - EXAM 5 1. Mcgougan Corporation produces a single...

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