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1. In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and
variable costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's:
Remembering Easy
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2. In determining cost of goods sold, two alternate costing concepts can be used: direct costing and variable costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
3. Fixed factory overhead costs are included as part of the cost of products manufactured under the
absorption costing concept.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
4. Under absorption costing, the cost of finished goods includes direct materials, direct labor, and all factory overhead.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
5. Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable
factory overhead.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
6. In variable costing, the cost of products manufactured is composed of only those manufacturing costs that
increase or decrease as the volume of production rises or falls.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
7. In variable costing, fixed costs do not become part of the cost of goods manufactured, but are considered
an expense of the period.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
9. Property taxes on a factory building would be included as part of the cost of products manufactured under
the absorption costing concept.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
10. The taxes on the factory superintendent's salary would be included as part of the cost of products
manufactured under the variable costing concept.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
11. The factory superintendent's salary would be included as part of the cost of products manufactured under
the absorption costing concept.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
12. Electricity purchased to operate factory machinery would be included as part of the cost of products
manufactured under the absorption costing concept.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
13. The absorption costing income statement does not distinguish between variable and fixed costs.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
14. In the absorption costing income statement, deduction of the cost of goods sold from sales yields gross profit.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
15. In the absorption costing income statement, deduction of the cost of goods sold from sales yields
contribution margin.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
16. In the absorption costing income statement, deduction of the cost of goods sold from sales yields net profit.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
17. On the variable costing income statement, deduction of the variable cost of goods sold from sales yields
gross profit.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
18. On the variable costing income statement, deduction of the variable cost of goods sold from sales
yields manufacturing margin.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
19. On the variable costing income statement, all of the fixed costs are deducted from the contribution margin.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
20. On the variable costing income statement, variable selling and administrative expenses are deducted
from manufacturing margin to yield contribution margin.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
21. On the variable costing income statement, variable costs are deducted from contribution margin to
yield manufacturing margin.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
22. On the variable costing income statement, the amounts representing the difference between the contribution
margin and income from operations is the fixed manufacturing costs and fixed selling and administrative
expenses.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
23. The contribution margin and the manufacturing margin are usually equal.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
24. For a period during which the quantity of inventory at the end was larger than that at the beginning, income
from operations reported under variable costing will be larger than income from operations reported under
absorption costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
25. For a period during which the quantity of inventory at the end was larger than that at the beginning, income
from operations reported under variable costing will be smaller than income from operations reported under
absorption costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
26. For an accounting period during which the quantity of inventory at the end was smaller than the quantity at
the beginning, income from operations reported under variable costing will be larger than income from
operations reported under absorption costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
27. For a period during which the quantity of inventory at the end was smaller than that at the beginning, income
from operations reported under variable costing will be smaller than income from operations reported under
absorption costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
28. For a period during which the quantity of inventory at the end equals the inventory at the beginning, income
from operations reported under variable costing will be smaller than income from operations reported under
absorption costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
29. For a period during which the quantity of inventory at the end equals the inventory at the beginning, income
from operations reported under variable costing will equal income from operations reported under absorption
costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
30. For a period during which the quantity of product manufactured exceeded the quantity sold, income from
operations reported under absorption costing will be smaller than income from operations reported under variable
costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
31. For a period during which the quantity of product manufactured exceeded the quantity sold, income from
operations reported under absorption costing will be larger than income from operations reported under variable
costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
32. For a period during which the quantity of product manufactured was less than the quantity sold, income
from operations reported under absorption costing will be larger than income from operations reported under
variable costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
33. For a period during which the quantity of product manufactured was less than the quantity sold, income from
operations reported under absorption costing will be smaller than income from operations reported under
variable costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
34. For a period during which the quantity of product manufactured equals the quantity sold, income from
operations reported under absorption costing will equal the income from operations reported under variable
costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
35. For a period during which the quantity of product manufactured equals the quantity sold, income from
operations reported under absorption costing will be smaller than the income from operations reported under
variable costing.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
36. Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and
production, directly affect the amount of income from operations reported under absorption costing.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
37. Under absorption costing, the amount of income reported from operations can be increased by producing more
units than are sold.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
38. Under absorption costing, increases or decreases in income from operations due to changes in inventory
levels could be misinterpreted to be the result of operating efficiencies or inefficiencies.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
39. Management may use both absorption and variable costing methods for analyzing a particular product.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
40. Property tax expense is an example of a controllable cost for the supervisor of a manufacturing department.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
41. Direct labor cost is an example of a controllable cost for the supervisor of a manufacturing department.
a. True
b. False
ANSWER: True
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
42. In the short run, the selling price of a product should normally not be less than the variable costs and expenses
of making and selling it.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
43. In the long run, for a business to remain in operation, the revenues from products sold should normally
cover all costs and expenses and provide a reasonable income.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
44. For short-run production planning, information in the absorption costing format is more useful to management
than is information in the variable costing format.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
45. For short-run production planning, information in the variable costing format is more useful to management
than is information in the absorption costing concept format.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
46. Sales mix is generally defined as the relative distribution of sales among the various products sold.
a. True
b. False
ANSWER: True
DIFFICULTY: Bloom's:
Remembering Easy
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
47. If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is
profitable to increase the sales of that product with the lowest contribution margin.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
48. If the ability to sell and the amount of production facilities devoted to each of two products is equal, it is
profitable to increase the sales of that product with the highest contribution margin.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
49. The contribution margin ratio is computed as contribution margin divided by sales.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
50. In evaluating the performance of salespersons, the salesperson with the highest level of sales should be
evaluated as the best performer.
a. True
b. False
ANSWER: False
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
51. Companies prepare contribution margin reports by market segments and product segments because
products contribute to profitability in various ways.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
52. Fords Expedition sport utility vehicle is its most profitable model. Therefore, Ford need not promote its
Expedition model anymore.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
53. The systematic examination of differences between planned and actual contribution margins is termed
contribution margin analysis.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
54. In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in
unit sales price or cost, is termed the quantity factor.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
55. In contribution margin analysis, the effect of a difference in the number of units sold, assuming no change in
unit sales price or cost, is termed the unit price or unit cost factor.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
56. In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units
sold is termed the unit price or unit cost factor.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
57. In contribution margin analysis, the effect of a difference in unit sales price or unit cost on the number of units
sold is termed the quantity factor.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
58. In contribution margin analysis, the quantity factor is computed as the difference between actual quantity sold
and the planned quantity sold, multiplied by the planned unit sales price or unit cost.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
59. In contribution margin analysis, the unit price or unit cost factor is computed as the difference between
actual quantity sold and the planned quantity sold, multiplied by the planned unit sales price or unit cost.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
60. In contribution margin analysis, the unit price or unit cost factor is computed as the difference between the
actual unit price or unit cost and the planned unit price or unit cost, multiplied by the actual quantity sold.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
61. A change in the amount of sales can be due to either a change in the units sold or a change in price or both.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
62. Contribution margin reporting and analysis is appropriate only for manufacturing firms, not for service firms.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-06 - 20-06
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
63. Service firms can only have one activity base for analyzing changes in costs.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-06 - 20-06
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
64. In a service firm, it may be necessary to have several activity bases to properly match the change in costs with
the changes in various activities.
a. True
b. False
ANSWER: True
DIFFICULTY: Moderate
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-06 - 20-06
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
65. Managers in service firms do not find contribution margin analysis reports useful because their firms do not
sell inventory.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-06 - 20-06
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
66. 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 all factory overhead cost?
a. Standard costing
b. Variable costing
c. Absorption costing
d. Marginal costing
ANSWER: c
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
67. 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. Absorption costing
b. Differential costing
c. Standard costing
d. Variable costing
ANSWER: d
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
ANSWER: c
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
69. Under absorption costing, which of the following costs would not be included in finished goods inventory?
a. direct labor cost
b. direct materials cost
c. variable and fixed factory overhead cost
d. variable and fixed selling and administrative expenses
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
70. Under absorption costing, which of the following costs would not be included in finished goods inventory?
a. hourly wages of assembly worker
b. straight-line depreciation on factory equipment
c. overtime wages paid to factory workers
d. the salaries for salespeople
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
71. Under variable costing, which of the following costs would not be included in finished goods inventory?
a. direct labor cost
b. direct materials cost
c. variable factory overhead cost
d. fixed factory overhead cost
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
72. Under variable costing, which of the following costs would be included in finished goods inventory?
a. neither variable nor fixed factory overhead cost
b. both variable and fixed factory overhead cost
c. only variable factory overhead cost
d. only fixed factory overhead cost
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
73. Under variable costing, which of the following costs would be included in finished goods inventory?
a. salary of salesperson
b. salary of vice-president of finance
c. wages of carpenters in a furniture factory
d. straight-line depreciation on factory equipment
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
74. Under variable costing, which of the following costs would not be included in finished goods inventory?
a. wages of machine operator
b. steel costs for a machine tool manufacturer
c. salary of factory supervisor
d. electricity used by factory machinery
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
75. Which of the following would be included in the cost of a product manufactured according to absorption costing?
a. advertising expense
b. sales salaries
c. depreciation expense on factory building
d. office supplies costs
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
76. Which of the following would be included in the cost of a product manufactured according to variable costing?
a. sales commissions
b. office supply costs
c. interest expense
d. direct materials
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
77. On the variable costing income statement, the figure representing the difference between manufacturing
margin and contribution margin is the:
a. fixed manufacturing costs
b. variable cost of goods sold
c. fixed selling and administrative expenses
d. variable selling and administrative expenses
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.28 - Variable and Fixed Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
78. In the variable costing income statement, deduction of variable selling and administrative expenses
from manufacturing margin yields:
a. differential margin
b. contribution margin
c. gross profit
d. marginal expenses
ANSWER: b
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
79. The amount of income under absorption costing will equal the amount of income under variable costing when
units manufactured:
a. exceed units sold
b. equal units sold
c. are less than units sold
d. are equal to or greater than units sold
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
80. The amount of income under absorption costing will be less than the amount of income under variable costing
when units manufactured:
a. exceed units sold
b. equal units sold
c. are less than units sold
d. are equal to or greater than units sold
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
81. Which of the following statements is correct using the direct costing concept?
a. All manufacturing costs are included in the calculation of cost of goods manufactured.
b. Only fixed costs are included in the calculation of cost of goods manufactured while variable costs
are considered period costs.
c. Only variable manufacturing costs are included in the calculation of cost of goods manufactured while
fixed costs are considered period costs.
d. All manufacturing costs are considered period costs.
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
82. The amount of income under absorption costing will be more than the amount of income under variable
costing when units manufactured:
a. exceed units sold
b. equal units sold
c. are less than units sold
d. are equal to or greater than units sold
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Remembering
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
83. The level of inventory of a manufactured product has increased by 7,000 units during a period. The following
data are also available:
Variable Fixed
Unit manufacturing costs of the period $12.00 $6.00
Unit operating expenses of the period 4.00 1.50
What would be the effect on income from operations if absorption costing is used rather than variable costing?
a. $42,000 decrease
b. $42,000 increase
c. $52,500 increase
d. $52,500 decrease
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
84. 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 decrease
b. $80,000 increase
c. $104,000 decrease
d. $104,000 increase
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
85. S&P Enterprises sold 10,000 units of inventory during a given period. The level of inventory of the
manufactured product remained unchanged. The manufacturing costs were as follows:
Variable Fixed
Unit manufacturing costs of the period $11.00 $7.00
Unit operating expenses of the period 3.00 2.50
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
86. 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 absorption costing is used rather than variable costing?
a. $80,000 decrease
b. $80,000 increase
c. $104,000 increase
d. $104,000 decrease
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
87. The level of inventory of a manufactured product has increased by 5,000 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. $50,000 decrease
b. $50,000 increase
c. $65,000 increase
d. $65,000 decrease
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
88. The level of inventory of a manufactured product has increased by 4,000 units during a period. The following
data are also available:
Variable Fixed
Unit manufacturing costs of the period $22.00 $11.00
Unit operating expenses of the period 7.00 5.00
What would be the effect on income from operations if absorption costing is used rather than variable costing?
a. $44,000 decrease
b. $44,000 increase
c. $64,000 increase
d. $64,000 decrease
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
89. A business operated at 100% of capacity during its first month and incurred the following
costs:
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. $56,000
c. $66,400
d. $78,400
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
90. A business operated at 100% of capacity during its first month and incurred the following costs:
Operating expenses:
Variable operating expenses $ 65,000
Fixed operating expenses 25,000 90,000
If 1,000 units remain unsold at the end of the month, what is the amount of inventory that would be reported on
the absorption costing balance sheet?
a. $38,000
b. $40,500
c. $34,000
d. $47,000
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
91. A business operated at 100% of capacity during its first month and incurred the following
costs:
Operating expenses:
Variable operating expenses $130,000
Fixed operating expenses 50,000 180,000
If 1,500 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. $62,500
b. $73,500
c. $60,000
d. $52,500
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
92. A business operated at 100% of capacity during its first month and incurred the following costs:
Operating expenses:
Variable operating expenses $ 65,000
Fixed operating expenses 25,000 90,000
If 600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the
absorption costing balance sheet?
a. $24,300
b. $28,200
c. $22,800
d. $34,000
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
93. A business operated at 100% of capacity during its first month and incurred the following costs:
Operating expenses:
Variable operating expenses $15,000
Fixed operating expenses 4,500 19,500
If 75 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the
absorption costing balance sheet?
a. $5,625
b. $5,250
c. $5,760
d. $6,210
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
94. A business operated at 100% of capacity during its first month and incurred the following
costs:
Operating expenses:
Variable operating expenses $ 60,000
Fixed operating expenses 18,000 78,000
If 500 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. $41,500
b. $36,000
c. $42,800
d. $38,500
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
95. A business operated at 100% of capacity during its first month and incurred the following costs:
Operating expenses:
Variable operating expenses $ 34,000
Fixed operating expenses 2,000 36,000
If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what would be
the amount of income from operations reported on the variable costing income statement?
a. $100,800
b. $100,000
c. $114,800
d. $140,000
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
96. A business operated at 100% of capacity during its first month and incurred the following
costs:
Operating expenses:
Variable operating expenses $17,000
Fixed operating expenses 1,000 18,000
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what would be
the amount of income from operations reported on the absorption costing income statement?
a. $50,400
b. $70,000
c. $52,000
d. $68,400
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
97. A business operated at 100% of capacity during its first month and incurred the following
costs:
Operating expenses:
Variable operating expenses $ 34,000
Fixed operating expenses 2,000 36,000
If 2,000 units remain unsold at the end of the month and sales total $300,000 for the month, what is the amount of
the manufacturing margin that would be reported on the variable costing income statement?
a. $104,000
b. $106,000
c. $140,000
d. not reported
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
98. A business operated at 100% of capacity during its first month and incurred the following
costs:
Operating expenses:
Variable operating expenses $17,000
Fixed operating expenses 1,000 18,000
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of
the manufacturing margin that would be reported on the absorption costing income statement?
a. $50,000
b. $54,000
c. not reported
d. $70,000
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
99. A business operated at 100% of capacity during its first month and incurred the following costs:
Operating expenses:
Variable operating expenses $17,000
Fixed operating expenses 1,000 18,000
If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of
the contribution margin that would be reported on the variable costing income statement?
a. $51,400
b. $52,000
c. $54,000
d. $53,000
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
100. A business operated at 100% of capacity during its first month, with the following results:
Operating expenses:
Variable operating expenses $ 12,000
Fixed operating expenses 2,000 14,000
What is the amount of the manufacturing margin that would be reported on the variable costing income
statement?
a. $30,000
b. $38,000
c. $56,000
d. $44,000
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
A business operated at 100% of capacity during its first month, with the following results:
101. What is the amount of the contribution margin that would be reported on the variable costing income
statement?
a. $34,200
b. $20,200
c. $29,700
d. $26,200
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
102. What is the amount of the income from operations that would be reported on the variable costing income
statement?
a. $18,900
b. $18,200
c. $18,000
d. $21,000
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
103. W
hat is the amount of the income from operations that would be reported on the absorption costing income statement?
a. $21,000
b. $18,900
c. $18,200
d. $27,900
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
104. What is the amount of the gross profit that would be reported on the absorption costing income statement?
a. $21,000
b. $18,900
c. $27,900
d. $18,000
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
105. Accountants prefer the variable costing method over absorption costing method for evaluating the
performance of a company because
a. by using the absorption costing method, income could appear to be higher by producing more inventory.
b. by using the absorption costing method, income could appear to be lower by producing more inventory.
c. by using the variable costing method, the cost of goods sold will be higher as more units are manufactured and
sales remain the same.
d. by using the variable costing method, all fixed and variable costs are included in the unit cost of the product
manufactured.
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
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Chapter 20(5): Variable Costing for Management Analysis
106. Under which inventory costing method could increases or decreases in income from operations be
misinterpreted to be the result of operating efficiencies or inefficiencies?
a. only variable costing
b. only absorption costing
c. both variable and absorption costing
d. neither variable nor absorption costing
ANSWER: b
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
107. It would be acceptable to have the selling price of a product just above the variable costs and expenses
of making and selling it in:
a. the long run
b. the short run
c. both the short run and long run
d. neither in the short run nor the long run
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
108. Costs that can be influenced by management at a specific level of management are called:
a. direct costs.
b. variable costs.
c. noncontrollable costs.
d. controllable costs.
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
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Chapter 20(5): Variable Costing for Management Analysis
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Chapter 20(5): Variable Costing for Management Analysis
109. Which of the following is(are) reason(s) for easy identification and control of variable manufacturing
costs under the variable costing method?
a. variable and fixed costs are reported separately.
b. variable costs can be controlled by the operating management.
c. fixed costs, such as property insurance, are normally the responsibility of higher management not
the operating management.
d. All of the above are true.
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
110. Management will use both variable and absorption costing in all of the following activities except:
a. controlling costs
b. product pricing
c. production planning
d. controlling inventory levels
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
111. Which of the following is not true when determining the selling price for a product?
a. Absorption costing should be used to determine routine pricing which includes both fixed and variable costs.
b. As long as the selling price is set above the variable costs, the company will make a profit in short run.
c. Variable costing is effective when determining short run decisions, but absorption costing is only used
for long-term pricing policies.
d. Both variable and absorption pricing plans should be considered, to include several pricing alternatives.
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
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Chapter 20(5): Variable Costing for Management Analysis
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Chapter 20(5): Variable Costing for Management Analysis
112. For a supervisor of a manufacturing department, which of the following costs is controllable?
a. direct materials
b. insurance on factory building
c. depreciation of factory building
d. sales salaries
ANSWER: a
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
113. The relative distribution of sales among various products sold is referred to as the:
a. by-product mix
b. joint product mix
c. profit mix
d. sales mix
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
114. Management should focus its sales and production efforts on the product or products that will provide
a. the highest sales revenue
b. the lowest product costs
c. the maximum contribution margin
d. the lowest direct labor hours
ANSWER: c
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
ANSWER: b
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
116. Contribution margin reporting can be beneficial for analyzing which of the following?
a. sales personnel
b. products
c. sales territory
d. all of the above
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
117. If sales totaled $200,000 for the current year (10,000 units at $20 each) and planned sales totaled
$212,500 (12,500 units at $17 each), the effect of the unit price factor on the change in sales is a:
a. $30,000 increase
b. $12,500 increase
c. $7,500 increase
d. $30,000 decrease
ANSWER: a
DIFFICULTY: Bloom's:
Applying
Moderate
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
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Chapter 20(5): Variable Costing for Management Analysis
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Chapter 20(5): Variable Costing for Management Analysis
118. In the contribution margin analysis, the effect of a change in the number of units sold, assuming no
change in unit sales price or unit cost, is referred to as the:
a. sales factor
b. cost of goods sold factor
c. quantity factor
d. price factor
ANSWER: c
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
119. In contribution margin analysis, the increase or decrease in unit sales price or unit cost on the number
of units sold is referred to as the:
a. sales factor
b. cost of goods sold factor
c. quantity factor
d. unit price or unit cost factor
ANSWER: d
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
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Chapter 20(5): Variable Costing for Management Analysis
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Chapter 20(5): Variable Costing for Management Analysis
121. In contribution margin analysis, the unit price or unit cost factor is computed as:
a. the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by
the planned quantity sold
b. the difference between the actual unit price or unit cost and the planned unit price or cost, multiplied by
the actual quantity sold
c. the difference between the actual quantity sold and the planned quantity sold, multiplied by the planned
unit sales price or unit cost
d. the difference between the actual quantity sold and the planned quantity sold, multiplied by the actual
unit sales price or unit cost
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
122. If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the quantity factor on the
change in contribution margin is:
a. $5,000 decrease
b. $5,000 increase
c. $5,750 increase
d. $5,750 decrease
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
123. If variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the unit cost factor on the
change in contribution margin is:
a. $12,000 increase
b. $5,750 decrease
c. $12,000 decrease
d. $5,750 increase
ANSWER: a
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
124. If variable selling and administrative expenses totaled $124,000 for the year (80,000 units at $1.55
each) and the planned variable selling and administrative expenses totaled $136,500 (78,000 units at $1.75
each), the effect of the quantity factor on the change in contribution margin is:
a. $3,000 increase
b. $3,500 decrease
c. $3,000 decrease
d. $3,500 increase
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
125. If variable selling and administrative expenses totaled $120,000 for the year (80,000 units at $1.50
each) and the planned variable selling and administrative expenses totaled $136,500 (78,000 units at $1.75
each), the effect of the unit cost factor on the change in contribution margin is:
a. $19,500 decrease
b. $19,500 increase
c. $20,000 decrease
d. $20,000 increase
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
126. If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled
$799,500 (78,000 units at $10.25 each), the effect of the unit price factor on the change in sales is:
a. $19,500 decrease
b. $19,500 increase
c. $20,000 decrease
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Chapter 20(5): Variable Costing for Management Analysis
d. $20,000 increase
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
127. If sales totaled $800,000 for the year (80,000 units at $10.00 each) and the planned sales totaled
$799,500 (78,000 units at $10.25 each), the effect of the quantity factor on the change in sales is:
a. $20,500 increase
b. $20,000 decrease
c. $20,500 decrease
d. $20,000 increase
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
128. If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the
change in contribution margin is:
a. $10,800 decrease
b. $10,800 increase
c. $10,000 increase
d. $10,000 decrease
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
129. If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned
variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the unit cost factor on the
change in contribution margin is:
a. $6,400 decrease
b. $6,400 increase
c. $7,200 increase
d. $7,200 decrease
ANSWER: c
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
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Chapter 20(5): Variable Costing for Management Analysis
130. Which of the following causes the difference between the planned and actual contribution margin?
a. an increase or decrease in the amount of sales
b. an increase in the amount of variable costs and expenses
c. a decrease in the amount of variable costs and expenses
d. all of the above
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
131. The systematic examination of the differences between planned and actual contribution margin is
a. gross profit analysis
b. contribution margin analysis
c. sales mix analysis
d. volume variance analysis
ANSWER: b
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
132. Ednas Chocolates had planned to sell chocolate covered strawberries for $3.00 each. Due to various
factors, the actual price was $2.75. Ednas was able to sell 1,000 more strawberries than the anticipated 4,000.
What is (1) the quantity factor and (2) the price factor for sales?
a. (1) $3,000, (2) $(1,250)
b. (1) $3,000, (2) $(3,000)
c. (1) $1,250, (2) $3,000
d. (1) $(4,000) (2) $(3,000)
ANSWER: a
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
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Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
ANSWER: d
DIFFICULTY: Challenging
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
134. In which of the following types of firms would it be appropriate to prepare contribution margin
reporting and analysis?
a. boat manufacturing
b. a chain of beauty salons
c. home building
d. all of the above
ANSWER: d
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-06 - 20-06
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
135. Which of the following would not be an appropriate activity base for cost analysis in a service firm?
a. lawns mowed
b. inventory produced
c. customers served
d. haircuts given
ANSWER: b
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-06 - 20-06
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
Sales $450,000
Variable cost of goods sold 240,000
Fixed manufacturing costs 70,000
Variable selling and administrative expenses 52,000
Fixed selling and administrative expenses 35,000
Determine the March (a) manufacturing margin, (b) contribution margin, and (c) income from operations for
Philadelphia Company.
ANSWER:
(a) $210,000 ($450,000 $240,000)
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
Sales $1,000,000
Variable cost of goods sold 490,000
Fixed manufacturing costs 170,000
Variable selling and administrative expenses 112,000
Fixed selling and administrative expenses 100,000
Determine the March (a) manufacturing margin, (b) contribution margin, and (c) income from operations for
Tony's Company.
ANSWER:
(a) $510,000 ($1,000,000 $490,000)
(b) $398,000 ($510,000 $112,000)
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
138. On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of
capacity during January. The following data summarized the results for January:
Units
Production 50,000
Sales ($18 per unit) 42,000
Inventory, January 31 8,000
Manufacturing costs:
Variable $575,000
Fixed 80,000
Total $655,000
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
ANSWER: (a)
Townsend Co.
Absorption Costing Income Statement
For Month Ended January 31, 20--
Sales $756,000
Cost of goods sold:
Cost of goods manufactured $655,000
Less inventory, January 31, 20-- 104,800
Cost of goods sold 550,200
Gross profit $205,800
Less selling and administrative expenses 45,500
Income from operations $160,300
(b)
Townsend Co.
Variable Costing Income Statement
For Month Ended January 31, 20--
Sales $756,000
Variable cost of goods sold:
Variable cost of goods manufactured $575,000
Less inventory, January 31, 20-- 92,000
Variable cost of goods sold 483,000
Manufacturing margin $273,000
Variable selling and administrative expense 35,000
Contribution margin $238,000
Fixed costs:
Fixed manufacturing costs $ 80,000
Fixed selling and administrative expenses 10,500 (90,500)
Income from operations $147,500
DIFFICULTY: Challenging
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
139. On October 31, the end of the first month of operations, Morristown & Co. prepared the
following income statement based on absorption costing:
If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600,
prepare an income statement using variable costing.
ANSWER:
Morristown & Co.
Variable Costing Income Statement
For Month Ended October 31, 20-
Sales $117,000
Variable cost of goods sold:
Variable cost of goods manufactured $42,600
Less ending inventory
(400 units $14.20) 5,680
Variable cost of goods sold 36,920
Manufacturing margin $ 80,080
Variable selling and administrative expenses 14,600
Contribution margin $ 65,480
Fixed costs:
Fixed manufacturing costs $42,900
Fixed selling and administrative expenses 6,900 49,800
Income from operations $ 15,680
Computations:
Variable cost of goods manufactured: $85,500 $42,900 = $42,600
Unit cost of ending inventory:
DIFFICULTY: Challenging
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
140. Fixed costs are $10 per unit and variable costs are $25 per unit. Production was 13,000 units, while sales
were 12,000 units. Determine (a) whether variable costing income from operations is less than or greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption costing
income from operations.
ANSWER:
(a) Variable costing income from operations is less than absorption cost
income from operations.
(b) $10,000 ($10 per unit 1,000 units)
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
141. Fixed costs are $50 per unit and variable costs are $125 per unit. Production was 130,000 units, while
sales were 125,000 units. Determine (a) whether variable costing income from operations is less than or greater
than absorption costing income from operations, and (b) the difference in variable costing and absorption costing
income from operations.
ANSWER:
(a) Variable costing income from operations is less than absorption
cost income from operations.
(b) $250,000 ($50 per unit 5,000 units)
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
142. At EOM Inc., the beginning inventory is 20,000 units. All of the units manufactured during the period
and 16,000 units of the beginning inventory were sold. The beginning inventory fixed costs are $50 per unit, and
variable costs are $300 per unit. Determine (a) whether variable costing income from operations is less than or
greater than absorption costing income from operations, and (b) the difference in variable costing and absorption
income from operations.
ANSWER:
(a) Variable costing income from operations is greater than absorption
costing income from operations.
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
143. The beginning inventory is 5,000 units. All of the units manufactured during the period and 3,000 units
of the beginning inventory were sold. The beginning inventory fixed costs are $25 per unit, and variable costs
are $55 per unit. Determine (a) whether variable costing income from operations is less than or greater than
absorption costing income from operations, and (b) the difference in variable costing and absorption income
from operations.
ANSWER: (a) Variable costing income from operations is greater than absorption
costing income from operations.
(b) $75,000 ($25 per unit 3,000 units)
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
144. Presented below are the major categories or captions that would appear on an income statement
prepared in the variable costing format:
Contribution margin
Fixed costs
Income from operations
Manufacturing margin
Sales
Variable cost of goods sold
Variable selling and administrative expenses
(a) Arrange the above captions in the proper order in accordance with the variable
costing concept.
(b) Which of the captions represents (1) the difference between sales and the total of
all the variable costs and expenses and (2) the remaining amount of revenue
available for fixed manufacturing costs, fixed expenses, and net income?
ANSWER:
(a) Sales
Variable cost of goods sold
Manufacturing margin
Variable selling and administrative expenses
Contribution margin
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
Fixed costs
Income from operations
(b) (1) Contribution margin
(2) Contribution margin
DIFFICULTY: Easy
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
145. At XLT Inc., variable costs are $80 per unit, and fixed costs are $40,000. Sales are estimated to be 4,000
units. (a) How much would absorption costing income from operations differ between a plan to produce 8,000
units and a plan to produce 10,000 units? (b) How much would variable costing income from operations differ
between the two production plans?
ANSWER: (a)
$8,000 greater. 8,000 units ($5.00 $4.00), or [2,000 units
$4.00]
(b) There would be no difference in variable costing income from
operations between the two plans.
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-02 - 20-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
146. If variable manufacturing costs are $15 per unit and total fixed manufacturing costs are $200,000,
what is the manufacturing cost per unit if:
(a) 20,000 units are manufactured and the company uses the variable costing concept?
(b) 25,000 units are manufactured and the company uses the variable costing concept?
(c) 20,000 units are manufactured and the company uses the absorption costing concept?
(d) 25,000 units are manufactured and the company used the absorption costing concept?
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
147. During the first year of operations, 18,000 units were manufactured and 13,500 units were sold.
On August 31, Olympic Inc. prepared the following income statement based on the variable costing
concept:
Olympic Inc.
Variable Costing Income Statement
For Year Ended August 31, 20--
Sales $297,000
Variable cost of goods sold:
Variable cost of goods manufactured $288,000
Less ending inventory 72,000
Variable cost of goods sold 216,000
Manufacturing margin $ 81,000
Variable selling and administrative expenses 40,500
Contribution margin $ 40,500
Fixed costs:
Fixed manufacturing costs $ 12,000
Fixed selling and administrative expenses 10,800 22,800
Income from operations $ 17,700
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption
costing concept.
ANSWER:
(a) $16.00 ($288,000 total variable cost of goods manufactured/18,000
units manufactured.)
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
148. Gyro Company manufactures Products T and W and is operating at full capacity. To manufacture
Product W requires three times the number of machine hours required for Product T. Market research
indicates that 1,000 additional units of Product W could be sold. The contribution margin by unit of product is
as follows:
Product T Product W
Sales price $300 $325
Variable cost of goods sold 235 250
Manufacturing margin $ 65 $ 75
Variable selling and administrative expenses 25 10
Contribution margin $ 40 $ 65
Calculate the increase or decrease in total contribution margin if 1,000 additional units of Product W are produced
and sold.
ANSWER:
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
North South
Sales volume (units):
Blouses 5,000 5,000
Skirts 4,000 8,000
Sales price per unit:
Blouses $20.00 $22.00
Skirts $18.00 $20.00
Variable cost per unit
Blouses $ 7.00 $ 9.00
Skirts $ 9.00 $11.00
Determine the contribution margin for (a) Skirts and (b) the South Region.
ANSWER:
(a) $108,000 [4,000 units ($18.00 $9.00)] + [8,000 units ($20.00 $11.00)]
(b) $137,000 [5,000 units ($22.00 $9.00)] + [8,000 units ($20.00 $11.00)]
DIFFICULTY: Moderate
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-04 - 20-04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
150. The Excelsior Company has three salespersons. Average sales price per unit sold, average variable
manufacturing costs per unit, and number of units sold for each salesperson are shown below.
151. The actual price for a product was $50 per unit, while the planned price was $44 per unit. The volume
increased by 4,000 to 60,000 total units. Determine (a) the quantity factor and (b) the price factor for sales.
ANSWER:
(a) $176,000 increase (4,000 units $44 per unit)
(b) $360,000 increase [($50 $44) 60,000 units]
DIFFICULTY: Challenging
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
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Chapter 20(5): Variable Costing for Management Analysis
152. Based upon the following data taken from the records of Bruce Inc., prepare a contribution margin
analysis report for the year ended December 31.
Per unit:
Sales price $2.60 $2.50 0.10
Variable cost of goods sold 1.41 1.40 0.01
Variable selling and administrative
expenses 0.27 0.30 (0.03)
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
ANSWER:
Bruce Inc.
Contribution Margin Analysis
For the Year Ended December 31
Planned contribution margin $104,000
Effect of changes in sales
Sales quantity factor:
Decrease in number of units sold (10,000)
Planned sales price $2.50 $(25,000)
Price factor:
Increase in unit sales price $0.10
Number of units sold 120,000 12,000
Total effect of changes in sales $(13,000)
DIFFICULTY: Challenging
Bloom's: Applying
LEARNING OBJECTIVES: FNMN.WARD.16.20-05 - 20-05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.30 - Contribution Margin
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20(5): Variable Costing for Management Analysis
DIFFICULTY: Moderate
Bloom's: Remembering
LEARNING OBJECTIVES: FNMN.WARD.16.20-01 - 20-01
FNMN.WARD.16.20-02 - 20-02
FNMN.WARD.16.20-03 - 20-03
ACCREDITING STANDARDS: ACCT.ACBSP.APC.27 - Managerial Accounting Features/Costs
ACCT.IMA.07 - Cost Management
BUSPROG: Analytic
ANSWER: c
ANSWER: a
ANSWER: b
ANSWER: a
157. Generally provides the most useful report for controlling costs.
ANSWER: b
158. Generally provides the most useful report for setting long-term prices.
ANSWER: a
ANSWER: c
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Chapter 20(5): Variable Costing for Management Analysis
ANSWER: a
2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.