Exam 2016, questions and answers PDF

Preview

Summary

Variable Costing Which of the following is not a type of absorption costing? a. direct costing b. actual costing c. normal costing d. none of the above Variable costing is unacceptable for a. managerial accounting b. financial accounting c. transfer pricing d. reporting by product lines for internal...

Description

Variable Costing 1.

Which of the following is not a type of absorption costing? a. direct costing b. actual costing

c. d.

normal costing none of the above

2.

Variable costing is unacceptable for a. managerial accounting b. financial accounting c. transfer pricing d. reporting by product lines for internal purposes

3.

A criticism of variable costing for managerial accounting purposes is that it a. is not acceptable for product line segmented reporting b. does not reflect cost-volume-profit relationships c. overstates inventories d. might encourage managers to emphasize the short term at the expense of the long term

4.

The use of variable costing requires knowing a. the contribution margin and break-even point for each product b. the variable and fixed components of production cost c. controllable and non-controllable components of all costs d. the number of units of each product produced during the period

5.

Advocates of variable costing for internal reporting purposes do not rely on which of the following points? a. the matching concept b. price-volume relationships c. absorption costing does not include selling and administrative expenses as part of inventoriable cost. d. production influences income under absorption costing

6.

Calculating income under variable costing does not require knowing a. unit sales c. selling price b. unit variable manufacturing costs d. unit production

7.

Inventoriable costs under absorption costing include a. both fixed and variable production costs b. only variable production costs c. all production costs plus variable selling and administrative costs d. all production costs plus all selling and administrative costs

8.

Inventoriable costs under variable costing include a. both fixed and variable production costs b. only variable production costs c. all production costs plus variable selling and administrative costs d. all production costs plus all selling and administrative costs

9.

Absorption costing and variable costing differ in that a. income is lower under variable costing b. variable costing treats selling costs as period costs c. variable costing treats all variable costs as product costs d. inventory cost is higher under absorption costing

10. Which method gives the lowest inventory cost per unit? a. Variable costing b. Absorption costing using normal capacity to set the standard fixed cost c. Absorption costing using practical capacity to set the standard fixed cost d. Actual absorption costing 11. Which costs are treated differently under absorption costing and variable costing? a. variable manufacturing costs b. fixed manufacturing costs c. variable selling and administrative expenses d. fixed selling and administrative expenses 12. ABC Company had 15,000 units in ending inventory. The total cost of those units under variable costing is

a. b. c. d.

less than it is under absorption costing the same as it is under absorption costing more than it is under absorption costing any of the above

13. Which variance cannot arise under variable costing?

a. b. c. d.

Variable overhead budget variance Variable overhead efficiency variance Fixed overhead budget variance Fixed overhead volume variance

14. Under variable costing, there can be no a. Fixed overhead variances b. Fixed overhead budget variance

c. d.

Fixed overhead volume variance No fixed overhead

15. Over the long-run, income under absorption costing will be a. Higher than the income under variable costing b. Lower than the income under variable costing c. Equal to the income under variable costing d. Incomparable to the income under variable costing 16. How will an unfavorable volume variance affect profit under a)absorption costing & b)variable costing a. a)increase b)increase c. a)decrease b)increase b. a)increase b)no effect d. a)decrease b)no effect 17. Which one of the following considers the impact of fixed overhead costs? a. Full absorption costing c. Direct costing b. Marginal costing d. Variable costing 18. Under variable costing, product costs include a. Variable & fixed conversion costs b. Prime costs & fixed manufacturing overhead c. Prime costs & variable manufacturing overhead d. Prime costs & variable selling & administrative overhead 19. How should the straight-line depreciation of a manufacturing facility be treated? a. Direct product cost under absorption costing b. Indirect product cost under variable costing c. Direct period cost under absorption costing d. Indirect period cost under variable costing 20. If absorption costing income shows the same amount as variable costing income, then a. Inventory level must have increased b. Production fell short of sales demand for the period c. Just-in-time system might be in use d. No conclusion can be made 21. A company practicing Just-In-Time (JIT) philosophy for the manufacture of its lone products shall expect a. Standard costing variances to be favorable b. Responsibility accounting reports to be inappropriate c. Break-even point to be higher than conventional system d. Absorption costing and variable costing income to be equal 22. The term that means all manufacturing costs (direct & indirect, fixed & variable) which can contribute to the production of the product, are traced to output and inventories is: a. job order costing c. absorption costing d. direct costing b. process costing 23. The term that is most descriptive of the type of cost accounting often called direct costing is: a. out-of-pocket costing c. relevant costing b. variable costing d. prime costing 24. Costs treated as product costs under direct costing are: a. prime costs only b. variable production costs only c. all variable costs d. all variable & fixed manufacturing costs 25. The basic assumption made in direct costing with respect to fixed costs is that fixed cost is: a. a controllable cost c. an irrelevant cost b. a product cost d. a period cost

26. Operating income computed using the direct costing would generally exceed operating income computed using the absorption costing if: a. units sold exceed units produced b. units sold are less than units produced c. units sold equal units produced d. the unit fixed cost is zero

27. Absorption costing differs from variable costing in the: a. fact that standard costs can be used with absorption costing but not with direct costing b. kinds of activities for which each can be used to report c. amounts of costs assigned to individual units of product d. amount of fixed costs that will be incurred 28. When using direct-costing information, the contribution margin discloses the excess of: a. revenue over fixed cost b. projected revenue over the break-even point c. revenue over variable cost d. variable over fixed cost 29. Operating income under absorption costing can be reconciled to operating income determined under direct costing by computing the difference between: a. inventoried fixed costs in the beginning and ending inventories and any deferred over or under-applied fixed factory overhead b. inventoried discretionary costs in the beginning and ending inventories c. gross profit (absorption costing) and contribution margin (direct costing) d. sales recorded under the absorption costing method 30. Operating income using direct costing as compared to absorption costing would be higher a. when the quantity of beginning inventory equals the quantity of ending inventory b. when the quantity of beginning inventory is more than the quantity of ending inventory c. when the quantity of beginning inventory is less than the quantity of ending inventory d. under no circumstances 31. Cullens Company manufactures a single product. Variable production costs are P10 and fixed production costs are P75,000. Cullens uses a normal activity of 10,000 units to set its standard costs. Cullens began the year with no inventory, produced 11,000 units and sold 10,500 units. What is the ending inventory under absorption costing? a. P 8,750 c. P 6,500 b. P 7,500 d. P 5,000 32. During the year 2016, Wolves Corporation manufactured 70,000 units of product A, a new product. Only 65,000 units were sold during the year. Manufacturing costs per unit was P20.00 variable and P50.00 fixed. What would be the effect on income if absorption costing is used instead of variable costing? c. Income is P100,000 lower a. Income is P250,000 lower d. Income is P100,000 higher b. Income is P250,000 higher 33. In its first year of operations, Wolf Manufacturers had the following costs when it produced 100,000 and sold 80,000 units of its only product: Manufacturing costs

Fixed P180,000 Variable 160,000

Selling & Administrative costs

Fixed P 90,000 Variable 40,000

How much lower would Wolf’s net income be if it used variable costing instead of full costing? a. P 36,000 c. P 68,000 b. P 54,000 d. P 94,000 34. In 2016, Sam Horseshoe Foundry projects the following information: Sales 900 units Selling price per horseshoe P300 Production 1,000 units Total variable manufacturing cost P140,000 Total fixed manufacturing cost P80,000 Marketing & administrative cost P60,000 (30% variable based on sales) The net income under variable costing would be: a. P 126,000 b. P 72,000

c. P 12,000 d. P 4,000

35. Speed Company, operating at normal capacity, manufactures 400,000 units of product with total variable costs of P3,600,000 and total fixed costs of P2,000,000. At the beginning of the year, the company had 30,000 units in...