1. The level of inventory of a manufactured product increases by 8,000 units during a period. The following data are also available:

	Variable	Fixed
Unit manufacturing costs during the period	$24.00	$10.00
Unit operating expenses during the period	8.00	3.00

What would be the effect on income from operations if variable costing is used rather than absorption costing?

	a.	$104,000 decrease
	b.	$80,000 decrease
	c.	$104,000 increase
	d.	$80,000 increase

2.

Under variable costing, which of the following costs would not be included in finished goods inventory?

a.

direct labor cost

b.

fixed factory overhead cost

c.

direct materials cost

d.

3.

Which of the following is(are) reason(s) for easy identification and control of variable manufacturing costs under the variable costing method?

	a.	variable and fixed costs are reported separately.
	b.	variable costs can be controlled by the operating management.
	c.	fixed costs, such as property insurance, are normally the responsibility of higher management not the operating management.
	d.	All of the above are true.