1, Which of the following statements is true?

A) Under variable costing, direct materials and direct labor are expensed as period

expenses

B) Under variable costing, fixed manufacturing overhead is expensed as period expenses.

C) Fixed manufacturing overhead costs are treated the same under both absorption costing and variable costing.

D) Reported income under absorption costing is not affected by production level changes.

E) Under absorption costing, fixed manufacturing overhead is expensed as period

expenses

2. Mentor Corp. has provided the following information for the current year:

Units produced	3,500 units
Sale price	$200 per unit
Direct materials	$70 per unit
Direct labor	$55 per unit
Variable manufacturing overhead	$20 per unit
Fixed manufacturing overhead	$350,000 per year
Variable selling and administrative costs	$30 per unit
Fixed selling and administrative costs	$150,000 per year

Calculate the unit product cost using absorption costing.

A) $245

B) $275

C) $55

D) $145

3. Mentor Corp. has provided the following information for the current year:

Units produced	3,500 units
Sale price	$200 per unit
Direct materials	$70 per unit
Direct labor	$55 per unit
Variable manufacturing overhead	$20 per unit
Fixed manufacturing overhead	$350,000 per year
Variable selling and administrative costs	$30 per unit
Fixed selling and administrative costs	$150,000 per year

Calculate the unit product cost using variable costing.

A) $245

B) $275

C) $55

D) $145

4. Under absorption costing, a company had the following unit costs when 8,000 units were

produced.

Direct labor	$	8.50	per unit
Direct material	$	9.00	per unit
Variable overhead	$	6.75	per unit
Fixed overhead ($60,000/8,000 units)	$	7.50	per unit
Total production cost	$	31.75	per unit

Compute the total production cost per unit under variable costing if 25,000 units had been produced.

A) $31.75

B) $27.25

C) $26.25

D) $24.25

E) $17.50

5. When evaluating a special order, management should:

A) Only accept the order if the incremental revenue exceeds all product costs.

B) Only accept the order if the incremental revenue exceeds fixed product costs.

C) Only accept the order if the incremental revenue exceeds total variable product costs.

D) Only accept the order if the incremental revenue exceeds full absorption product costs.

E) Only accept the order if the incremental revenue exceeds regular sales revenue.

6. Which of the following best describes costs assigned to the product under the absorption

costing method?

Direct labor (DL)

Direct materials (DM)

Variable selling and administrative (VSA)

Variable manufacturing overhead (VOH)

Fixed selling and administrative (FSA)

Fixed manufacturing overhead (FOH)

A) DL, DM, VSA, and VOH.

B) DL, DM, and VOH.

C) DL, DM, VOH, and FOH.

D) DL and DM.

E) DL, DM, FSA, and FOH.

7. Which of the following best describes costs assigned to the product under the variable

costing method?

Direct labor (DL)

Direct materials (DM)

Variable selling and administrative (VSA)

Variable manufacturing overhead (VOH)

Fixed selling and administrative (FSA)

Fixed manufacturing overhead (FOH)

A) DL, DM, VSA, and VOH.

B) DL, DM, and VOH.

C) DL, DM, VOH, and FOH.

D) DL and DM.

E) DL, DM, FSA, and FOH.

12. Howley Company has the following information for April:

Sales $912,000

VC of goods sold 474,000

FC mfg. 82,000

VC selling & adm. 238,000

FC selling & adm. 54,700

Determine:

1. Operating Income for Howley during the month of April.