1) Which of the following would be included in the cost of a product manufactured according to absorption costing?

a. Advertising expense b. Sales salaries c. double declining balance depreciation expense on factory building d. Office supplies costs 2) The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured:

a.are less than units sold b. are equal to or greater than units sold c. exceed units sold d. equal units sold 3) A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (20,000 units): Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses:

Variable operating expenses $130,000 Fixed operating expenses 50,000 $180,000 If 1,500 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. $56,000 b. $64,000 c.$60,000 d. $52,500 4)A business operated at 100% of capacity during its first month, with the following results:

Sales (80 units) $80,000 Production costs (100 units): Direct materials $50,000 Direct labor 10,000 Variable factory overhead 5,000 Fixed factory overhead 2,000 67,000 Operating expenses: Variable operating expenses $ 6,000 Fixed operating expenses 1,000 7,000

What is the amount of the gross profit that would be reported on the absorption costing income statement? a. $19,400 b. $22,000 c. $21,000 d. $26,400 5) What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost? a. Variable costing b. Differential costing c. Standard costing d. Absorption costing 6) Which of the following would not be deducted in determining the contribution margin under variable costing? a. variable factory overhead b. sales commissions c. direct labor d. sales office depreciation 7) A business operated at 100% of capacity during its first month and incurred the following costs:

Production costs (10,000 units): Direct materials $ 90,000 Direct labor 120,000 Variable factory overhead 140,000 Fixed factory overhead 50,000 $400,000

Operating expenses: Variable operating expenses $ 65,000 Fixed operating expenses 25,000 $90,000 If 700 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. $28,000 b. $34,000 c. $32,000 d. $24,500 8)A business operated at 100% of capacity during its first month, with the following results:

Sales (160 units) $160,000 Production costs (200 units): Direct materials $100,000 Direct labor 20,000 Variable factory overhead 10,000

Fixed factory overhead 4,000 134,000

Operating expenses: Variable operating expenses $ 12,000 Fixed operating expenses 2,000 14,000

What is the amount of the manufacturing margin that would be reported on the variable costing income statement? a. $30,000 b. $56,000 c. $44,000 d. $38,800 9) Management should concentrate its sales and production efforts on the product or products with: a. the highest contribution margin b. the highest sales c. the highest contribution margin per unit d. the lowest costs 10) The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available:

Variable Fixed Unit manufacturing costs of the period $12.00 $5.00 Unit operating expenses of the period $4.00 $1.50

What would be the effect on income from operations if absorption costing is used rather than variable costing? a. $44,000 increase b. $40,000 decrease c. $40,000 increase d. $52,000 increase