Question

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.

Answer 1

1.

A) Under variable costing, direct materials and direct labor are expensed as period  expenses - Under variable and absorption costing Direct materials and direct labor will be product cost always. so this statement is False

C) Fixed manufacturing overhead costs are treated the same under both absorption costing and variable costing. - Under absorption costing Fixed manufacturing overhead will treated as product cost and under variable costing it will treat as period cost. so this statement also False

D) Reported income under absorption costing is not affected by production level changes. -- Fixed manufacturing overhead will change based on production level changes. it will affect the product cost. so it may lead to change in net income. so this statement also False

E) Under absorption costing, fixed manufacturing overhead is expensed as period expenses -Under absorption costing Fixed manufacturing overhead will be product cost. so this statement is False

B) Under variable costing, fixed manufacturing overhead is expensed as period expenses. - Under absorption costing, Fixed manufacturing overhead will consider as product cost and under variable costing it will consider as period expenses. so this statement is True

Answer is B