Managerial Accounting

1. Under variable costing, fixed manufacturing overhead is:

A) carried in a liability account.

B) carried in an asset account.

C) ignored.

D) immediately expensed as a period cost.

2. Under absorption costing, fixed manufacturing overhead costs:

A) are deferred in inventory when production exceeds sales.

B) are always treated as period costs.

C) are released from inventory when production exceeds sales.

D) none of these.

3. In an income statement prepared as an internal report using variable costing, variable selling and administrative expenses would:

A) not be used.

B) be used in the computation of the contribution margin.

C) be used in the computation of net operating income but not in the computation of the contribution margin.

D) be treated the same as fixed selling and administrative expenses.

4. When production exceeds sales, the net operating income reported under absorption costing generally will be:

A) less than net operating income reported under variable costing.

B) greater than net operating income reported under variable costing.

C) equal to net operating income reported under variable costing.

D) higher or lower because no generalization can be made.

5. Gyro Gear Company produces a single product, a special gear used in automatic transmissions. Each gear sells for $28, and the company sells 500,000 gears each year. Unit cost data are presented below:

		Variable	Fixed
	Direct material..........................	$6.00
	Direct labor...............................	$5.00
	Manufacturing overhead...........	$2.00	$7.00
	Selling & administrative............	$4.00	$3.00

The unit product cost of gears under variable costing is:

A) $13

B) $20

C) $17

D) $27

6. A company produces a single product. Variable production costs are $12 per unit and variable selling and administrative expenses are $3 per unit. Fixed manufacturing overhead totals $36,000 and fixed selling and administration expenses total $40,000. Assuming a beginning inventory of zero, production of 4,000 units and sales of 3,600 units, the dollar value of the ending inventory under variable costing would be:

A) $4,800

B) $8,400

C) $6,000

D) $3,600

Use the following to answer questions 7-12:

Abbey Company, which has only one product, has provided the following data concerning its most recent month of operations:

	Selling price........................................................	$129
	Units in beginning inventory..............................	0
	Units produced..................................................	6,300
	Units sold...........................................................	6,100
	Units in ending inventory..................................	200
	Variable costs per unit:
	Direct materials...............................................	$32
	Direct labor.....................................................	$50
	Variable manufacturing overhead....................	$5
	Variable selling and administrative..................	$11
	Fixed costs:
	Fixed manufacturing overhead.........................	$88,200
	Fixed selling and administrative......................	$97,600

7. What is the unit product cost for the month under variable costing?

A) $87

B) $101

C) $112

D) $98

8. What is the unit product cost for the month under absorption costing?

A) $101

B) $98

C) $87

D) $112

9. The total contribution margin for the month under the variable costing approach is:

A) $170,800

B) $256,200

C) $100,900

D) $189,100

10. The total gross margin for the month under the absorption costing approach is:

A) $189,100

B) $6,100

C) $170,800

D) $191,000

11. What is the net operating income for the month under variable costing?

A) $3,300

B) $2,800

C) ($14,100)

D) $6,100

12. What is the net operating income for the month under absorption costing?

A) $3,300

B) $2,800

C) ($14,100)

D) $6,100

13. In an income statement segmented by product line, a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be: A. classified as a traceable fixed expense and not allocated. B. allocated to the product lines on the basis of sales dollars. C. allocated to the product lines on the basis of segment margin. D. classified as a common fixed expense and not allocated.

14. All other things being equal, if a division's traceable fixed expenses increase: A. the division's contribution margin ratio will decrease. B. the division's segment margin ratio will remain the same. C. the division's segment margin will decrease. D. the overall company profit will remain the same.

15. Hatch Company has two divisions, O and E. During the year just ended, Division O had a segment margin of $9,000 and variable expenses equal to 70% of sales. Traceable fixed expenses for Division E were $19,000. Hatch Company as a whole had a contribution margin ratio of 40%, a segment margin of $25,000, and sales of $200,000. Given this data, the sales for Division E for last year were: A. $50,000 B. $150,000 C. $87,500 D. $116,667