15 MULTIPLE CHOICE AND TRUE FALSE QUESTIONS. ONLY NEED ANSWERS NO WORK

1. Under absorption costing, the more units added to ending Finished Goods Inventory, the less fixed manufacturing overhead is '"hidden" in ending Finished Goods Inventory at the end of the accounting period.

True

False

2.Absorption costing is more appropriate than variable costing for making plant production capacity decisions.

True

False

3.By separating costs by behavior, fixed and variable, a service company can calculate the contribution margin ratio by dividing the contribution margin by revenues.

True

False

4.Variable costing is more appropriate than absorption costing when the decision ________.

involves reducing fixed costs that are controllable by the upper management

does not involve analysis of contribution margin

relates to production planning within the capacity limits in the short run

does not involve analysis of profitability based on sales mix

5.Which of the following statements is true of absorption and variable costing methods?

Absorption costing considers fixed manufacturing overhead to be period costs.

Both costing methods consider selling and administrative costs to be period costs.

Both costing methods consider fixed manufacturing overhead to be product costs.

Variable costing considers variable selling and administrative costs to be product costs.

6.Which of the following is considered a period cost under variable costing but not under absorption costing?

variable selling and administrative costs

variable manufacturing costs

fixed manufacturing overhead

fixed selling and administrative costs

7.Which is the following is the most appropriate reason that sales mix decisions should be made using variable costing?

To increase profits, businesses should emphasize the products with the highest contribution margin.

All costs, including fixed costs, are controllable by upper management in the long run.

Fixed costs do not affect the operating income in the long run.

Sales mix decisions primarily focus on fixed costs.

8.Unit product cost calculations using absorption costing do not include ________.

variable manufacturing overhead

variable selling and administrative costs

fixed manufacturing overhead

direct materials

9.When all of the units produced are sold, the operating income is the same under both the absorption and variable costing methods. Assume no beginning and ending inventories. Which of the following gives the correct reason for the above statement?

A portion of the fixed manufacturing overhead is still in the Finished Goods Inventory account.

All selling and administrative expenses have been recorded as period costs.

Fixed manufacturing costs have not been considered when calculating the operating incomes.

All costs incurred have been recorded as expenses.

10. Missan, Inc. reports the following information:

Units produced	640	units
Units sold	440	units
Sales price	$200	per unit
Direct materials	$29	per unit
Direct labor	$12	per unit
Variable manufacturing overhead	$18	per unit
Fixed manufacturing overhead	$18,500	per year
Variable selling and administrative costs	$4	per unit
Fixed selling and administrative costs	$13,500	per year

There are no beginning inventories. What is the ending balance in Finished Goods Inventory using absorption costing? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.)

$11,800

$17,582

$5,781

$13,981

11.Crystal Pools, Inc. has provided the following information for the year.

Units produced	14,000	units
Sales price	$400	per unit
Direct materials	$45	per unit
Direct labor	$20	per unit
Variable manufacturing overhead	$65	per unit
Fixed manufacturing overhead	$500,000	per year
Variable selling and administration costs	$85	per unit
Fixed selling and administration costs	$270,000	per year

What is the unit product cost using absorption costing? (Round any intermediate calculations and your final answer to the nearest dollar.)

$166

$130

$150

$65

12.Carbon, Inc. reports the following information for April:

Alpha	Beta
Units sold	2,000units	800units
Sales price per unit	$350	$600
Variable manufacturing cost per unit	150	500
Sales commission per unit:
Alpha:8% of sales price	28
Beta:8% of sales price	48

What is the contribution margin of Alpha?

$400,000

$124,000

$644,000

$344,000

13.Dentofax, Inc. reports the following information for August:

Sales Revenue	$800,000
Variable Cost of Goods Sold	110,000
Fixed Cost of Goods Sold	65,000
Variable Selling and Administrative Costs	130,000
Fixed Selling and Administrative Costs	65,000

Calculate the operating income for August using absorption costing.

$995,000

$240,000

$430,000

$370,000

14.E-trax, Inc. has provided the following financial information for the year:

Finished Goods Inventory:
Beginning balance, in units	610
Units produced	2,800
Units sold	2,900
Ending balance, in units	510
Production costs:
Variable manufacturing costs per unit	$50
Total fixed manufacturing costs	$42,000

What is the unit product cost for the year using absorption costing?

$65

$64

$82

$119