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For retailers and service companies without inventory,operating income is different if a traditional income statement or a contribution margin income statement is prepared.

A) True
B) False

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Discuss and compare absorption costing income statements with variable costing income statements.In your discussion,address the following questions: a.What is the main difference between the two methods? b.Under what circumstances will the operating income under each method be the same? c.What situation will cause the absorption costing income to be higher than the variable costing income? d.What situation will cause the absorption costing income to be lower than the variable costing income? e.Why would a company use absorption costing to prepare its income statements? f.Why would a company use variable costing to prepare its income statements?

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a.Fixed manufacturing overhead is expens...

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To follow is information about the units produced and total manufacturing costs for Pine Enterprises for the past six months. To follow is information about the units produced and total manufacturing costs for Pine Enterprises for the past six months. Using the high-low method,what will the total monthly manufacturing costs be if the company produces 9,000 units? A) $8,750 B) $4,500 C) $8,400 D) $4,250 Using the high-low method,what will the total monthly manufacturing costs be if the company produces 9,000 units?


A) $8,750
B) $4,500
C) $8,400
D) $4,250

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

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When a merchandiser prepares a contribution margin income statement,Cost of Goods Sold is always a variable cost.

A) True
B) False

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Steeplechase Building Specialties manufactures metal stud to accommodate commercial framing contractors in the United States.The managerial accountant reported to the operations manager that there is an order to manufacture 2,000 bundles of metal stud during the month.The managerial accountant reported the following information: Steeplechase Building Specialties manufactures metal stud to accommodate commercial framing contractors in the United States.The managerial accountant reported to the operations manager that there is an order to manufacture 2,000 bundles of metal stud during the month.The managerial accountant reported the following information: Determine the cost equation for the managerial accountant and predict the operating costs at a volume of 2,000 bundles of metal stud at Steeplechase Building Specialties. A) $120 B) $220 C) $340 D) $440,120 Determine the cost equation for the managerial accountant and predict the operating costs at a volume of 2,000 bundles of metal stud at Steeplechase Building Specialties.


A) $120
B) $220
C) $340
D) $440,120

E) B) and D)
F) C) and D)

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What factor related to manufacturing costs causes the difference between operating income computed using absorption costing and operating income computed using variable costing?


A) Absorption costing expenses all costs,whether fixed or variable.
B) Absorption costing "inventories" all direct manufacturing costs.
C) Absorption costing "inventories" all fixed manufacturing costs.
D) Absorption costing "inventories" all fixed manufacturing and period costs.

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

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Absorption costing is required to be used for


A) federal income tax reports.
B) external financial reports,but not income taxes.
C) neither external financial reports nor income tax reports.
D) both external financial reports and income tax reports.

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

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Using account analysis,what type of cost is the fee the airline company charges for your bags? A typical policy is $25 if the bag weighs between 0 and 50 lbs. ;$75 if the bag weighs between 50 and 75 lbs.and $125 if the bag weighs between 75 and 100 lbs.


A) Fixed
B) Mixed
C) Step
D) Variable

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

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In a regression output,the "X variable 1 coefficient" represents the variable cost component of a mixed cost equation.

A) True
B) False

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Tasty Treats is a snow cone stand near the local park.To plan for the future,Tasty Treats wants to determine its cost behavior patterns.It has the following information available about its operating costs and the number of snow cones served. Tasty Treats is a snow cone stand near the local park.To plan for the future,Tasty Treats wants to determine its cost behavior patterns.It has the following information available about its operating costs and the number of snow cones served. Using the high-low method,the fixed costs for a month are A) $980. B) $12,660. C) $1,500. D) $5,320. Using the high-low method,the fixed costs for a month are


A) $980.
B) $12,660.
C) $1,500.
D) $5,320.

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

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Best Birdies produces ornate birdcages.The company's average cost per unit is $18.00 at a production level of 2,200 birdcages.What is the total cost of producing 2,200 birdcages?


A) $39,600
B) $18.00
C) $2,218
D) $122

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

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If the number of units produced equals the number of units sold for a manufacturer,both variable costing and absorption costing income statements will yield the same gross margin.

A) True
B) False

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On a traditional income statement,all manufacturing-related costs,whether fixed or variable,are listed


A) above the gross profit line.
B) above the contribution margin line.
C) below the operating income line.
D) above the sales line.

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

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The HF Corporation manufactures and sells toy gyroscopes.The following data is related to sales and production of the toy gyroscopes for last year. The HF Corporation manufactures and sells toy gyroscopes.The following data is related to sales and production of the toy gyroscopes for last year. Using absorption costing,what is gross profit for last month? A) $903,000 B) $1,497,000 C) $1,200,000 D) $3,703,000 Using absorption costing,what is gross profit for last month?


A) $903,000
B) $1,497,000
C) $1,200,000
D) $3,703,000

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

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Maryland Incorporated produces toys.Total manufacturing costs are $350,000 when 50,000 toys are produced.Of this amount,total variable costs are $100,000.What are the total production costs when 75,000 toys are produced? (Assume the same relevant range for both production levels. )


A) $150,000
B) $400,000
C) $500,000
D) $525,000

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

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What data point can be used to solve for the fixed cost component when using the high-low method?


A) The "high" month
B) Either the "high" or the "low" month
C) The "low" month
D) Any month in the data set

E) None of the above
F) All of the above

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Neon Company manufactures widgets.The following data is related to sales and production of the widgets for last year. Neon Company manufactures widgets.The following data is related to sales and production of the widgets for last year. Using variable costing,what is the contribution margin for last year? A) $216,700 B) $68,200 C) $143,000 D) $69,300 Using variable costing,what is the contribution margin for last year?


A) $216,700
B) $68,200
C) $143,000
D) $69,300

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

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For external reporting purposes,U.S.GAAP allows companies to use


A) either the traditional format or the contribution margin format.
B) only the contribution margin format of the income statement.
C) only the traditional format of the income statement.
D) the variable costing format.

E) B) and C)
F) B) and D)

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In the equation y = $7.20x + $790,"x" represents


A) number of units produced.
B) total fixed costs.
C) total costs.
D) none of the above.

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

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Total fixed costs for Toys and Trinkets Incorporated are $88,000.Total costs,including both fixed and variable,are $155,000 if 268,000 units are produced.The total variable costs at a level of 275,000 units would be


A) $68,750.
B) $159,049.
C) $90,299.
D) $151,055.

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

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