1 The Snow Company began the year with no inventories of work in process or finished goods. The company projected the following costs for the year:

Variable costs:
Direct materials	$18 per unit
Direct labour	$12 per unit
Manufacturing overhead	$ 8 per unit
Selling expenses	$ 4 per unit
Fixed costs:
Manufacturing overhead	$90,000 per month
Selling and administrative	$40,000 per month

During the first three months of the year, production and sales in units were as follows:

	Production	Sales
January	30,000	30,000
February	30,000	26,000
March	30,000	34,000

The company sells its product for $60 per unit. Actual costs were as projected for the first three months. There were no work in process inventories at the end of each month.

The unit cost of production for February under variable costing would be:

Select one:

a. $30

b. $38

c. $41

d. $42

e. None of these

2

The Snow Company began the year with no inventories of work in process or finished goods. The company projected the following costs for the year:

Variable costs:
Direct materials	$18 per unit
Direct labour	$12 per unit
Manufacturing overhead	$ 8 per unit
Selling expenses	$ 4 per unit
Fixed costs:
Manufacturing overhead	$90,000 per month
Selling and administrative	$40,000 per month

During the first three months of the year, production and sales in units were as follows:

	Production	Sales
January	30,000	30,000
February	30,000	26,000
March	30,000	34,000

The company sells its product for $60 per unit. Actual costs were as projected for the first three months. There were no work in process inventories at the end of each month.

The unit cost of production for March under absorption costing would be:

Select one:

a. $30

b. $38

c. $41

d. None of these

e. $42

3

When variable costing is used, all of the following are considered product costs EXCEPT:

Select one:

a. fixed overhead

b. direct labour

c. direct materials

d. variable selling expenses

e. variable overhead

4

When variable costing is used the income statement is usually prepared using:

Select one:

a. a contribution-margin format

b. a functional format

c. an operational format

d. none of these formats

e. all of these formats

5

Absorption costing

Select one:

a. Is used for external reporting purposes

b. None of these is correct

c. Is the method in which the fixed overhead cost is not included in inventory

d. Treats production costs as expenses in the period in which they are incurred

e. Includes variable and fixed period costs in inventory

6

Absorption costing will produce a larger operating profit than variable costing if

Select one:

a. None of these is correct

b. Fixed production overhead decreases

c. Units produced exceed units sold

d. Units sold exceed units produced

e. Fixed production overhead increases