Question
In: Accounting
1. Operating profit computed under absorption costing will be: Select one: a. higher than operating profit...
1.
Operating profit computed under absorption costing will be:
Select one:
a. higher than operating profit under variable costing when units produced are less than units sold.
b. higher than operating profit under variable costing in all cases.
c. higher than operating profit under variable costing when units produced are greater than units sold.
d. equal to operating
2.
The average unit cost at a monthly volume of 9,000 units is GH¢ 3, and the average unit cost at a monthly volume of 22,500 units is GH¢ 2.10. What are the total monthly costs if 15,000 units are produced?
Select one:
a. GH¢ 36,000.
b. GH¢ 35,000.
c. GH¢ 44,000.
d. GH¢ 36,600.
3.
ABC Company wishes to make a profit of GH¢150,000. It has fixed costs of GH¢75,000 with a contribution margin ratio of 75% and a selling price of GH¢10 per unit. How many units would the Company need to sell in order to achieve the required level of profit?
Select one:
a. 30,000 units.
b. 10,000 units.
c. 15,000 units.
d. 22,500 units
4.
Under variable costing, product costs consist of
Select one:
a. variable production costs.
b. variable production and selling costs.
c. variable and fixed production costs.
d. variable selling costs.
Solutions
Expert Solution
| Q.1 | Correct Option C | |||
| Operating profit computed under absorption costing will be higher than operating profit under variable costing when units produced are greater than units sold because manufacturing fixed overhead allocated to units which are not sold are not deducted in absorption costing while total of the manufacturing overhead is deducted in variable costing and nothing deferred in ending inventory. | ||||
| Q.2 | Correct Option A : GH¢ 36,000. | |||
| Units Sold | Total Cost | |||
| High LEVEL | 22500 | 47250 | ||
| Low Level | 9000 | 27000 | ||
| Change | 13500 | 20250 | ||
| Change per unit (Variable cost) = Change in total cost / Change in Units Sold | ||||
| =(20250/13500) | ||||
| 1.5 | per unit | |||
| Fixed Cost calculation | ||||
| Variable Cost + Fixed cost = Total cost | ||||
| 1.5 * 9000 + Fixed Cost = 27000 | ||||
| Fixed Cost = 13500 | ||||
| Cost for 15000 Units | ||||
| Variable cost | 22500 | |||
| Add: Fixed cost | 13500 | |||
| Total cost | 36000 | |||
| Q.3 | Correct Option A 30,000 units. | |||
| Target Units = (Fixed cost + Target Profit )/Contribution margin per unit | ||||
| =(150000 + 75000) /7.5 | ||||
| 30000 | Units | |||
| Q.4 | Correct Option a. variable production costs. | |||
| Note : Variable costing does not take fixed cost as production cost | ||||
ekkarill92 answered 1 year agoRelated Solutions
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unit, P4 of which represents the variable selling expense. The
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What was the absorption costing net operating income last year?
****Please type out the answer. Compute net operating income under absorption costing based on the following...
****Please type out the answer.
Compute net operating income under absorption costing based on
the following data.
Unit cost for direct
materials
$10
Unit cost for direct
labor
15
Unit cost for variable manufacturing
overhead
7
Unit variable selling and administrative
expense 2
Total fixed manufacturing
overhead
$100,000
Total fixed selling and administrative
expense
80,000
Units in beginning
inventory
0
Units
produced
25,000
Units
sold
22,000
Unit selling
price
$70
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1- Competition among entrepreneurs will result in
Select one:
a. Workers getting paid higher wages than otherwise due to
better alternative employment opportunities available.
b. Consumers paying higher prices than otherwise, due to
increased cost.
c. Entrepreneurs making higher profits than otherwise due to
increased efficiency.
d. Less product innovation than otherwise due to increased cost
pressures and lower research budgets.
Mastery Problem: Variable Costing for Management Analysis Absorption vs. Variable Operating income is one of the...
Mastery Problem: Variable Costing for Management
Analysis
Absorption vs. Variable
Operating income is one of the most important items reported by
a company. Depending on the decision-making needs of management,
operating income can be determined using absorption costing or
variable costing.
Select whether the following characteristics are most often
associated with absorption costing or variable costing.
Required under generally accepted accounting principles
(GAAP)
Often used for internal use in decision making
Cost of goods manufactured includes only variable manufacturing
costs...
Mastery Problem: Variable Costing for Management Analysis Absorption vs. Variable Operating income is one of the...
Mastery Problem: Variable Costing for Management
Analysis
Absorption vs. Variable
Operating income is one of the most important items reported by
a company. Depending on the decision-making needs of management,
operating income can be determined using absorption costing or
variable costing.
Select whether the following characteristics are most often
associated with absorption costing or variable costing.
Required under generally accepted accounting principles
(GAAP)
Absorption Costing
Often used for internal use in decision making
Variable Costing
Cost of goods manufactured includes...
Mastery Problem: Variable Costing for Management Analysis Absorption vs. Variable Operating income is one of the...
Mastery Problem: Variable Costing for Management
Analysis
Absorption vs. Variable
Operating income is one of the most important items reported by
a company. Depending on the decision-making needs of management,
operating income can be determined using absorption costing or
variable costing.
Select whether the following characteristics are most often
associated with absorption costing or variable costing.
Required under generally accepted accounting principles
(GAAP)
Often used for internal use in decision making
Cost of goods manufactured includes only variable manufacturing
costs...
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