Question

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.Standard costing

c.Absorption costing

d.Differential costing

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	$24.00	$10.00
Unit operating expenses of the period	8.00	3.00

What would be the effect on income from operations if variable costing is used rather than absorption costing?

a.$80,000 increase

b.$104,000 decrease

c.$104,000 increase

d.$80,000 decrease

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 1,600 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.$64,000

b.$66,400

c.$78,400

d.$56,000

Answer 1