1) The level of inventory of a manufactured product has increased by 4,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $22.00 $11.00 Unit operating expenses of the period 7.00 5.00 What would be the effect on income from operations if absorption costing is used rather than variable costing? a. $64,000 increase b. $44,000 decrease c. $44,000 increase d. $64,000 decrease

2)A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (10,000 units): Direct materials $170,000 Direct labor 360,000 Variable factory overhead 190,000 Fixed factory overhead 50,000 $770,000 Operating expenses: Variable operating expenses $ 60,000 Fixed operating expenses 18,000 78,000 If 500 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet? a. $42,800 b. $41,500 c. $38,500 d. $36,000

3)A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (18,400 units): Direct materials $177,200 Direct labor 236,300 Variable factory overhead 260,300 Fixed factory overhead 94,900 $768,700 Operating expenses: Variable operating expenses $123,800 Fixed operating expenses 44,100 167,900 If 1,800 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the absorption costing balance sheet? a. $91,624 b. $75,204 c. $65,915 d. $78,026

4)Which of the following is not true when determining the selling price for a product? a. Absorption costing should be used to determine routine pricing which includes both fixed and variable costs. b. Variable costing is effective when determining short run decisions, but absorption costing is only used for long-term pricing policies. c. As long as the selling price is set above the variable costs, the company will make a profit in short run. d. Both variable and absorption pricing plans should be considered, to include several pricing alternatives.