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Exam 9: Income Effects of Denominator Level on Inventory Valuation

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Question 41

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There is not an output-level variance for variable costing, because

A) the inventory level decreased during the period.
B) the inventory level increased during the period.
C) fixed manufacturing overhead is allocated to work-in-process.
D) fixed manufacturing overhead is not allocated to work-in-process.
E) variable manufacturing overhead is not allocated to work-in-process.

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

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Question 42

Multiple Choice

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Under variable costing, which of the following expenses is inventoriable?

A) variable manufacturing overhead
B) direct manufacturing labour and fixed manufacturing overhead
C) marketing and direct manufacturing labour
D) variable manufacturing overhead and administrative
E) variable and fixed manufacturing overhead

F) B) and D)
G) All of the above

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Question 43

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Unused capacity is considered wasted resources and the result of poor planning.

How does the capacity level chosen to compute the budgeted fixed overhead cost rate affect the production-volume variance?

Answer the following question(s) using the information below. Heinrich Corporation budgeted fixed manufacturing costs of $6,000 during 2012. Other information for 2012 includes: The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. -Fixed manufacturing costs included in ending inventory total

You are the management accountant for the West coast division of a musical instrument manufacturing company. There are three manufacturing plants in your division. Each plant manager was given decision making authority in terms of production, as long as income for their plant kept on pace. The manager at Plant A has consistently been the leader in profit for the division, but the other two managers are complaining that Plant A doesn't seem to be selling any more product than they are. The division manager has noticed higher inventory levels at Plant A, which the plant manager justifies by saying the higher levels are needed to ensure adequate sales. The division manager suspects that there could be other reasons, and she has asked you to provide three proposals for revising performance evaluation.

Answer the following question(s) using the information below. The following information pertains to the Bean Company: -What is the variable costing break-even point in units?

Johnson and Sons Company was concerned that increased sales did not result in increased profits for 2012. Both variable unit and total fixed manufacturing costs for 2011 and 2012 remained constant at $20 and $2,000,000, respectively. In 2011 the company produced 100,000 units and sold 80,000 units at a price of $50 per unit. There was no beginning inventory in 2011. In 2012 the company made 70,000 units and sold 90,000 units at a price of $50. Selling and administrative expenses were all fixed at $100,000 each year. Required: a. Prepare income statements for each year using absorption costing in the gross margin format. b. Prepare income statements for each year using variable costing in the contribution margin format. c. Explain why the income was different each year using the two methods. Show computations.

Answer the following question(s) using the information below. Gabe's Auto produces and sells an auto part for $30.00 per unit. In 2012, 100,000 parts were produced and 75,000 units were sold. Other information for the year includes: -What is the inventoriable cost per unit using absorption costing?

Answer the following question(s) using the information below. Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: -Helton Company has the following information for the current year: What is the difference between operating incomes under absorption costing and variable costing?

When all fixed manufacturing costs and variable manufacturing costs are included as inventorial costs, the method being used is

The marketing manager's performance evaluation is most fair when based on a denominator level using

What is Honda Heaven's inventorial cost per box using absorption costing?

Absorption-costing income statements cannot easily differentiate between variable and fixed costs.

Another common term used by some companies for variable costing is direct costing.

The gross-margin format of the income statement highlights the lump sum of fixed manufacturing costs.

What is the practical capacity for the month of April?

Explain how using master-budget capacity utilization for setting prices can lead to a downward demand spiral.

Answer the following question(s) using the information below. Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit. In the first month of operation, 2,000 units were produced and 1,750 units were sold. Actual fixed costs are the same as the amount budgeted for the month. Other information for the month includes: -What is cost of goods sold per unit using variable costing?

Answer the following question(s) using the information below. Greene Manufacturing incurred the following expenses during 2012: -What will be the break-even point in units if absorption costing is used?