Chapter 8—Absorption and Variable Variable Costing, and Inventory Management TRUE/A!"E
1. Variable Variable costing costing and absorption absorption costing costing income statements statements may differ because because of their their treatment of fixed factory overhead. ANS: T PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement "N)easurement / !A: !A: Performance easurement / A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. 0. !nventory costs costs under variable costing costing include include only direct direct materials7 direct labor7 labor7 and variable factory factory overhead. ANS: T PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 8. !nventory !nventory under under absorption absorption costing costing includes includes only direct direct materials materials and direct labor. labor. ANS: " !nventory under absorption costing includes direct materials7 direct labor7 variable factor y overhead7 and fixed factory overhead. PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT NAT: %*SP+$,: Analytic Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 9. !f the number number of units units produced in a period period is larger than the number of units sold in a period7 absorption costing income 6ill be higher than variable costing income. ANS: T PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . !f the number number of units units produced produced in a period period is smaller smaller than than the number number of units units sold sold in period7 period7 absorption costing income 6ill be higher than variable costing income. ANS: " PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min.
;. Product Product cost cost includ includes es all all costs costs of the company company.. ANS: " PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . $n a segmented segmented income income statement7 fixed fixed costs are bro
T PTS: 1 !": ifficulty: #asy '$: ()0 NAT: %*SP+$,: Analytic A!-PA: A!-PA: "N)+eporting / !A: -ost anagement anagement / A-%SP: A-%SP: AP-)0()V AP-)0()Variabl ariablee and "ixed -osts -osts %loom5s: 3no6ledge N$T: 1 min.
(. The The cost costss of not having having a product available 6hen demanded by a customer are called stoc. &!T relies relies on a push push system system to control control finished finished good good inventory inventory.. ANS: " &!T relies on a pull system to control finished good inventory. inventory. PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT NAT: %*SP+$,: Analytic Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. 11. 11. A ma?or ma?or dra6bac< dra6bac< to the &!T invento inventory ry approach approach is that it increase increasess carrying carrying costs. ANS: " PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. MATC#I
%$ ;. Product Product cost cost includ includes es all all costs costs of the company company.. ANS: " PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . $n a segmented segmented income income statement7 fixed fixed costs are bro
T PTS: 1 !": ifficulty: #asy '$: ()0 NAT: %*SP+$,: Analytic A!-PA: A!-PA: "N)+eporting / !A: -ost anagement anagement / A-%SP: A-%SP: AP-)0()V AP-)0()Variabl ariablee and "ixed -osts -osts %loom5s: 3no6ledge N$T: 1 min.
(. The The cost costss of not having having a product available 6hen demanded by a customer are called stoc. &!T relies relies on a push push system system to control control finished finished good good inventory inventory.. ANS: " &!T relies on a pull system to control finished good inventory. inventory. PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT NAT: %*SP+$,: Analytic Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. 11. 11. A ma?or ma?or dra6bac< dra6bac< to the &!T invento inventory ry approach approach is that it increase increasess carrying carrying costs. ANS: " PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. MATC#I
%$ Match the type of income income statement to the the costs it includes. includes. a. Variable riable cost costing ing inco income me state stateme ment nt b. Absorption costing costing income statement c. %oth %oth typ types es of income income statem statement entss
1. 0. 8. 9. . ;. . (.
irect irect materi materials als for units units sol sold d irect irect labor labor for units units sold sold Variable riable over overhea head d for unit unitss sold sold "ixed "ixed facto factory ry overh overhead ead for for the the period period $nly fixed fixed factory factory overhead overhead for units units sold sold Variable riable sellin selling g expe expense nse "ixe "ixed d ssel elli ling ng expe expens nsee Admi Admini nist stra rati tive ve expen expense se
1. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. 0. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee N$T: 1 min. 8. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee N$T: 1 min. 9. ANS: A PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee N$T: 1 min. . ANS: % PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee N$T: 1 min. ;. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee N$T: 1 min. . ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee N$T: 1 min. (. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)+eporting / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)>=)"inancial AP-)>=)"inancial Statements Statements / A-% A-%SP: SP: APAP-)0 )0) )a an nager ageria iall Accou ccount ntiing "ea "eature turess2-o 2-osts sts 3#4 3#4: %lo %loom om5s 5s:: 3no 3no6 6ledg ledgee
N$T: 1 min. Match each statement statement with the correct correct item below. below. a. the costs costs of not not having having a product product availabl availablee 6hen demand demanded ed by a customer customer b. the costs of carrying inventory inventory c. approach approach that that maintains maintains goods goods should should be pulled pulled through through the the system system by present present demand demand d. the number number of units units in the the order order @uantity @uantity that that minimi minimies es the total total cost cost e. the cost costss of placi placing ng and and recei receivin ving g an order order
=. 1>. 1>. 11. 10. 10. 18. 18.
-arr -arry ying ing cos costs #con #conom omic ic orde orderr @uant @uantity ity &ust &ust)i )in) n)ti tim me $rde $rderi ring ng cost costss Stoc Stoc
=. ANS: % PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement /A!-PA /A!-PA:: "N)ecision odeling / !A: ecision Analysis / A-%SP: AP-)0)anagerial Ac Accounting "ea "eatures2-osts 3#4: %loom5s: 3no 3no6ledge N$T: 1 min. 1>. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: A-%SP: AP-)88)!ncremental AP-)88)!ncremental analysis 3#4: %loom5s: 3no6ledge N$T: 1 min. 11. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting "e "eatures2-osts 3#4: %loom5s: 3n 3no6ledge N$T: 1 min. 10. ANS: # PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement /A!-PA /A!-PA:: "N)ecision odeling / !A: ecision Analysis / A-%SP: AP-)0)anagerial Ac Accounting "ea "eatures2-osts 3#4: %loom5s: 3no 3no6ledge N$T: 1 min. 18. ANS: A PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: STA: A!-PA: A!-PA: "N)easurement /A!-PA /A!-PA:: "N)ecision odeling / !A: ecision Analysis / A-%SP: AP-)0)anagerial Ac Accounting "ea "eatures2-osts 3#4: %loom5s: 3no 3no6ledge N$T: 1 min. C&M'!ETI&$
1. BBB BBBBBB BBBBBB BBBBBB BBBBBB BBB assig assigns ns all manufacturing costs to the product. ANS: ANS: Absor Absorpt ption ion costin costing g PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT NAT: %*SP+$,: Analytic Analytic STA: STA: A!-PA: A!-PA: "N)easurement / !A: -ost -ost anagement / A-%SP: A-%SP: AP-)0)anagerial AP-)0)anagerial Accounting Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 0. Chen using using BBBBBBBBBBBBBBB BBBBBBBBBBBBBBB a company only assigns assigns variable variable manufacturing manufacturing costs costs to the product. product.
ANS: variable costing PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 8. ,enerally accepted accounting principles re@uire BBBBBBBBBBBBBB for external reporting. ANS: absorption costing PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 9. The BBBBBBBBBBBBBBBBBBB income statement groups expenses according to function. ANS: absorption)costing PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . The BBBBBBBBBBBBBBB income statement groups expenses according to cost behavior. ANS: variable)costing PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ;. Absorption costing treats fixed factory overhead as a BBBBBBBBBBBB. ANS: product cost. PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . Variable costing treats fixed factory overhead as a BBBBBBBBBBBBBB. ANS: period expense. PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge
N$T: 1 min. (. "or internal reporting BBBBBBBBBBBBBBBB is an important managerial tool because it provides vital cost information for decision ma. A BBBBBBBBBBBB is a subunit of a company of sufficient importance to 6arrant the production of performance reports. ANS: segment PTS: 1 !": ifficulty: #asy $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 11. $n a segmented income statement7 fixed expenses are bro
$%&: '$: ()0
STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 18. All BBBBBBBBBBBBBB expenses 6ill vanish if a particular segment is eliminated. ANS: direct fixed PTS: 1 !": ifficulty: #asy $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 19. !nventory taxes7 obsolescence7 and insurance are examples of BBBBBBBBBBBBBBB. ANS: carrying costs. PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 1. 'ost sales and costs of expediting shipments of goods are examples of BBBBBBBBBBBBBBB. ANS: stoc
1(. Chen a company needs to place a ne6 order for goods7 they have reached the BBBBBBBBBBB. ANS: reorder point PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 1=. BBBBBBBBBBBBBB is computed by multiplying the lead time by the difference bet6een the maximum rate of usage and the average rate of usage. ANS: Safety stoc< PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 0>. The BBBBBBBBBBBBBB approach maintains that goods should be pulled through the system by present demand rather than being pushed through on a fixed schedule based on anticipated demand. ANS: ?ust)in)time PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. MU!TI'!E C#&ICE
1. Chich of the follo6ing types of costs is a product cost for absorption costing but a period cost for variable costingE a. direct materials b. direct labor c. fixed factory overhead per unit sold d. variable selling expense e. total administrative expense ANS: $%&: STA: 3#4:
PTS: 1 !": ifficulty: #asy '$: ()1 NAT: %*SP+$,: Analytic A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0()Variable and "ixed -osts %loom5s: 3no6ledge N$T: 1 min.
0. Chich of the follo6ing is never included in product costE a. overhead b. direct materials c. variable selling expense d. fixed factory overhead
e. direct labor ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 8. ,enerally Accepted Accounting Principles F,AAPG re@uire the use of 6hich accounting method for external reportingE a. absorption costing. b. variable costing. c. transfer price costing. d. responsibility costing. e. all of these are acceptable for ,AAP. ANS: A PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 9. Variable costing is a. a good 6ay to value inventories for the balance sheet. b. used for external reporting purposes. c. not useful for companies 6ith multiple segments. d. a useful tool for management decision ma
N$T: 1 min. . Chen monthly production volume is constant and sales volume is less than production7 income determined 6ith variable costing procedures 6ill a. al6ays be greater than income determined using absorption costing. b. al6ays be less than income determined using absorption costing. c. be e@ual to income determined using absorption costing. d. be e@ual to contribution margin per unit times units sold. ANS: % PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: -omprehension N$T: 1 min. (. Chen production is less than sales volume7 income under absorption costing 6ill be BBBB income using variable costing procedures. a. greater than b. less than c. e@ual to d. randomly different than ANS: % PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: -omprehension N$T: 1 min. =. !nventory values calculated using variable costing as opposed to absorption costing 6ill generally be a. e@ual. b. less. c. greater. d. t6ice as much. ANS: % PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 1>. Chich of the follo6ing statements is trueE a. Absorption costing income exceeds variable costing income 6hen units produced and sold are e@ual. b. Variable costing income exceeds absorption costing income 6hen units produced exceed units sold. c. Absorption costing income exceeds variable costing income 6hen units produced are less than units sold. d. Absorption costing income exceeds variable costing income 6hen units produced are greater than units sold. ANS: PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min.
11. All of the follo6ing costs are included in inventory under absorption costing except a. direct materials. b. direct labor. c. fixed selling expenses. d. fixed factory overhead. ANS: PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 10. Chat is the primary difference bet6een variable and absorption costingE a. inclusion of fixed selling expenses in product costs b. inclusion of variable factory overhead in period costs c. inclusion of fixed selling expenses in period costs d. inclusion of fixed factory overhead in product costs ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ig(re 8)*+ 'ast year7 "abre -ompany produced 0>7>>> units and sold 1(7>>> units at a price of H10. -osts for last year 6ere as follo6s:
irect materials irect labor Variable factory overhead "ixed factory overhead Variable selling expense "ixed selling expense "ixed administrative expense
H07>>> 87>>> 107>>> 87>>> =7>>> 7>> 17>>
"ixed factory overhead is applied based on expected production. 'ast year7 "abre expected to produce 0>7>>> units. 18. +efer to "igure ()1. Assuming that beginning inventory 6as ero7 6hat is the value of ending inventory under absorption costingE a. H79(> b. H97>> c. H1>7=>> d. H107;>> e. H7> ANS: *nit product cost I FH07>>> J H87>>> J H107>>> J H87>>>G20>7>>> I H.9 #nding inventory I H.9 x 07>>> I H1>7=>>
PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 19. +efer to "igure ()1. Assuming that beginning inventory 6as ero7 6hat is the value of ending inventory under variable costingE a. H878>> b. H07>> c. H7>>> d. H870> e. H70>> ANS: # *nit product cost I FH07>>> J H87>>> J H107>>>G20>7>>> I H8.;> #nding inventory I H8.;> x 07>>> I H70>> PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 1. +efer to "igure ()1. Chat is operating income for last year under absorption costingE a. H917>>> b. H;70> c. H(7=>> d. H11178>> e. H97>>> ANS: Sales 'ess: -$,S ,ross margin 'ess: Selling expenses Admin. expenses $perating income
01;7>>> =(71>> 117=>> 1;7>> 17>> (7=>>
PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. 1;. +efer to "igure ()1. Chat is operating income for last year under variable costingE a. H1117(>> b. H=17(> c. H(070>> d. H(79>>
e. H;;78> ANS: Sales 'ess: variable expenses: Variable -$,S Variable selling expense -ontribution margin 'ess: fixed expenses: " ixed factory overhead "ixed selling expense "ixed admin. #xpense $perating income
01;7>>> ;97(>> =7>>> 19070>> 87>>> 7>> 17>> (070>>
PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. ig(re 8)+ 'oring -ompany had the follo6ing data for the month:
Variable costs per unit: irect materials irect labor Variable overhead Variable selling expenses
H9.>> 8.0> 1.>> .9>
"ixed overhead is H97>>> per monthK it is applied to production based on normal activity of 07>>> units. uring the month7 07>>> units 6ere produced. 'oring started the month 6ith 8>> units in beginning inventory7 6ith unit product cost e@ual to this month5s unit product cost. A total of 071>> units 6ere sold during the month at price of H19. Selling and administrative expense for the month7 all fixed7 totaled H87;>>. 1. +efer to "igure ()0. Chat is the unit product cost under absorption costingE a. H(.;> b. H1>.;> c. H(.0> d. H1>.0> e. H.0> ANS: irect materials irect labor Variable overhead "ixed overhead Total
H 9.>> 8.0> 1.>> 0.>> H1>.0>
PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting
"eatures2-osts N$T: 8 min.
3#4:
%loom5s: Application
1(. +efer to "igure ()0. Chat is operating income under variable costingE a. H879> b. H7=(> c. H11789> d. −H9> e. H879> ANS: # Sales − Var. -$,S − Var. Selling expense -ontribution margin − "ixed factory overhead − "ixed selling and admin. expense $perating income
H0=79>> 1700> (9> H11789> 97>>> 87;>> H 879>
irect materials irect labor Variable overhead Total
H9.>> 8.0> 1.>> H(.0>
071>> units sold L H19 I H0=79>> 071>> units cost L H(.0> I H1700> 071>> units variable selling cost L.9> I H(9> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. 1=. +efer to "igure ()0. Chat is the unit product cost under variable costingE a. H(.;> b. H1>.;> c. H(.0> d. H1>.0> e. H.0> ANS: irect materials irect labor Variable overhead Total
H9.>> 8.0> 1.>> H(.0>
PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 0>. +efer to "igure ()0. Chat is operating income under absorption costingE
a. b. c. d. e.
H879> H7=(> H11789> −H9> H879>
ANS: A Sales − -$,S ,ross margin − Variable selling expense − "ixed selling M admin. expense $perating income
H0=79>> 01790> H 7=(> (9> 87;>> H 879>
Sales I H19 × 071>> -$,S I H1>.0> × 071>> Variable Selling expense I .9> × 071>> irect materials irect labor Variable overhead "ixed overhead Total
H 9.>> H 8.0> H 1.>> H 0.>> H1>.0>
PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. ig(re 8)-+ The follo6ing information pertains to ayberry -orporation:
%eginning inventory #nding inventory irect labor per unit irect materials per unit Variable overhead per unit "ixed overhead per unit Variable selling and admin. costs per unit "ixed selling and admin. costs per unit
17>>> units ;7>>> units H9> 0> 1> 8> ; 19
01. +efer to "igure ()9. Chat is the value of the ending inventory using the absorption costing methodE a. H09>7>>> b. H8;>7>>> c. H;>>7>>> d. H90>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: FH9> J H0> J H1> J H8>G × ;7>>> I H;>>7>>> PTS: 1
!":
ifficulty: oderate
$%&: '$: ()1
NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 00. +efer to "igure ()9. Absorption costing income 6ould be BBBB variable costing income. a. H1>7>>> greater than b. H1>7>>> less than c. H09>7>>> less than d. H09>7>>> greater than ANS: A S*PP$+T!N, -A'-*'AT!$NS: "ixed overhead in beginning inventory "ixed overhead in ending inventory ifference
H 8>7>>> 1(>7>>> H1>7>>>
Since production exceeds sales7 absorption costing income is larger by H1>7>>>. PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis N$T: 0 min. 08. +efer to "igure ()9. Chat is the value of the ending inventory using the variable costing methodE a. H09>7>>> b. H8;>7>>> c. H8>7>>> d. H90>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: FH9> J H0> J H1>G × ;7>>> I H90>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. ig(re 8).+ Sanders -ompany has the follo6ing information for last year:
Selling price Variable production costs Variable selling and admin. expenses "ixed production costs "ixed selling and admin. expenses *nits produced *nits sold There 6ere no beginning inventories.
H1=> per unit H0 per unit produced H1( per unit sold H09>7>>> H1(>7>>> 107>>> 7>>>
09. +efer to "igure (). Chat is the value of ending inventory for Sanders using the absorption costing methodE a. H8;>7>>> b. H0(>7>>> c. H00>7>>> d. H8(>7>>> ANS: A S*PP$+T!N, -A'-*'AT!$NS: FH0 JF H09>7>>>G2107>>>GGO x 7>>> I H8;>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 0. +efer to "igure (). Chat is the income for Sanders using the absorption costing methodE a. H0>7>>> b. H9(>7>>> c. H170>>7>>> d. H>>7>>> ANS: A S*PP$+T!N, -A'-*'AT!$NS: FH1=> ) H0G x 7>>>O ) H1(>7>>> ) F7>>> x H1(G I H0>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. 0;. +efer to "igure (). Chat is the cost of ending inventory for Sanders using the variable costing methodE a. H8>>7>>> b. H0(>7>>> c. H10>7>>> d. H0;>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: H0 x 7>>> I H0;>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 0. +efer to "igure (). Chat is the income for Sanders using the variable costing methodE a. H90>7>>> b. H9(>7>>> c. H0>7>>>
d. H>>7>>> ANS: A S*PP$+T!N, -A'-*'AT!$NS: FH1=> ) H0 ) H1(G x 7>>>O ) H90>7>>> I H90>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. ig(re 8)+ %ailey -ompany incurred the follo6ing costs in manufacturing des< calculators:
irect materials !ndirect materials FvariableG irect labor !ndirect labor FvariableG $ther variable factory overhead "ixed factory overhead Variable selling expenses "ixed selling expenses
H1( 8 = 18 89 0; 10
uring the period7 the company produced and sold 07>>> units. 0(. +efer to "igure ();. Chat is the inventory cost per unit using absorption costingE a. H1>9 b. H c. H(9 d. H80 ANS: S*PP$+T!N, -A'-*'AT!$NS: H> J H89 I H(9 PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 0=. +efer to "igure ();. Chat is the inventory cost per unit using variable costingE a. H0 b. H;; c. H0 d. H> ANS: S*PP$+T!N, -A'-*'AT!$NS: irect materials !ndirect materials FvariableG irect labor
H1( 8 =
!ndirect labor FvariableG $ther variable factory overhead Total
18 H>
PTS: 1 !": ifficulty: #asy $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. ig(re 8)0+ +amon -ompany reported the follo6ing units of production and sales for &une and &uly:
onth &une &uly
*nits Produced 1>>7>>> 1>>7>>>
Sold =>7>>> 1>7>>>
!ncome under absorption costing for &une 6as H9>7>>>K income under variable costing for &uly 6as H>7>>>. "ixed costs 6ere H;>>7>>> for each month. 8>. +efer to "igure (). o6 much 6as income for &uly using absorption costingE a. H>7>>> b. H0>7>>> c. H(>7>>> d. H9>7>>> ANS: % S*PP$+T!N, -A'-*'AT!$NS: FH;>>7>>>21>>7>>>G × 7>>> I H8>7>>> Absorption costing is lo6er by H8>7>>>. Therefore7 H>7>>> less H8>7>>> e@uals a profit of H0>7>>>. PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis N$T: 0 min. 81. +efer to "igure (). o6 much 6as income for &une using variable costingE a. H9>7>>> b. H0>7>>> c. HF9>7>>>G d. HF0>7>>>G ANS: S*PP$+T!N, -A'-*'AT!$NS: FH;>>7>>>21>>7>>>G × 1>7>>> I H;>7>>> Absorption costing is higher by H;>7>>>. Therefore7 H9>7>>> less H;>7>>> e@uals a loss of H0>7>>>. PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0)
anagerial Accounting "eatures2-osts N$T: 0 min.
3#4:
%loom5s: Analysis
ig(re 8)8+ Steele -orporation has the follo6ing information for &anuary7 "ebruary7 and arch:
*nits produced *nits sold
1an(ary 1>7>>> 7>>>
ebr(ary 1>7>>> (7>>
Mar2h 1>7>>> 1>7>>
Production costs per unit Fbased on 1>7>>> unitsG are as follo6s: irect materials irect labor Variable factory overhead "ixed factory overhead Variable selling and admin. expenses "ixed selling and admin. expenses
H10 ( ; 9 1> 9
There 6ere no beginning inventories for &anuary7 and all units 6ere sold for H>. -osts are stable over the three months. 80. +efer to "igure ()(. Chat is the "ebruary ending inventory for Steele -orporation using the absorption costing methodE a. H8=7>>> b. H97>>> c. H187>>> d. H8>>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: 97>> × FH10 J H( J H; J H9G I H187>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis N$T: 0 min. 88. +efer to "igure ()(. Chat is the &anuary ending inventory for Steele -orporation using the variable costing methodE a. H0;>7>>> b. H(7>>> c. H1>(7>>> d. H=>7>>> ANS: % S*PP$+T!N, -A'-*'AT!$NS: 87>>> × FH10 J H( J H;G I H(7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis
N$T: 0 min. 89. +efer to "igure ()(. Chat is the arch ending inventory for Steele -orporation using the variable costing methodE a. H10>7>>> b. H1>97>>> c. H0;>7>>> d. H17>>> ANS: % S*PP$+T!N, -A'-*'AT!$NS: *nits of beginning inventory *nits produced *nits sold *nits of ending inventory
1an(ary > 1>7>>> 7>>> 87>>>
ebr(ary 87>>> 1>7>>> (7>> 97>>
Mar2h 97>> 1>7>>> 1>7>> 97>>>
97>>> × H0; I H1>97>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis N$T: 0 min. 8. +efer to "igure ()(. Chat is the "ebruary contribution margin for Steele -orporation using the variable costing methodE a. H09>7>>> b. H1>7>>> c. H11=7>>> d. H0>97>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: (7>> × FH> − H8;G I H11=7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. ig(re 8)3+ The follo6ing information pertains to Star< -orporation:
%eginning inventory #nding inventory irect labor per unit irect materials per unit Variable overhead per unit "ixed overhead per unit Variable selling costs per unit "ixed selling costs per unit
> units 7>>> units H0> 1; 9 1> 10 1;
8;. +efer to "igure ()=. Chat is the value of ending inventory using the variable costing methodE a. H81>7>>> b. H0>7>>> c. H0>>7>>> d. H8=>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: FH0> J H1; J H9G × 7>>> I H0>>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 8. +efer to "igure ()=. Absorption costing income 6ould be BBBB the variable costing income. a. H>7>>> greater than b. H>7>>> greater than c. H>7>>> less than d. H>7>>> less than ANS: A S*PP$+T!N, -A'-*'AT!$NS: There is H>7>>> more in fixed cost in ending inventory relative to beginning inventory. !n addition7 production exceeds sales. Therefore7 absorption costing income is larger by H>7>>>. PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis N$T: 0 min. 8(. +efer to "igure ()=. Chat is the value of ending inventory using the absorption costing methodE a. H81>7>>> b. H0>7>>> c. H0>>7>>> d. H8=>7>>> ANS: % S*PP$+T!N, -A'-*'AT!$NS: FH0> J H1; J H9 J H1>G × 7>>> I H0>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 8=. +edding -ompany has t6o divisions 6ith the follo6ing segment margins for the current year: Northern7 H0>>7>>>K Southern7 H9>>7>>>. -ommon expenses of the company are H>7>>>. Chat is +edding -ompany5s incomeE a. H1>7>>> b. H>7>>>
c. H;>>7>>> d. H;>7>>> ANS: % S*PP$+T!N, -A'-*'AT!$NS: H0>>7>>> J H9>>7>>> − H>7>>> I H>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()1 / '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1 min. 9>. Segment margin is e@ual to segment sales revenue minus a. variable cost of goods sold7 variable selling expense7 and direct fixed costs. b. variable cost of goods sold7 variable selling expense7 and common fixed costs. c. variable cost of goods sold7 total selling expense7 and direct fixed costs. d. variable cost of goods sold7 variable selling expense7 administrative expense7 and direct fixed costs. e. cost of goods sold7 variable selling expense7 and fixed factory overhead. ANS: A PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 91. Chich of the follo6ing could be considered a segmentE a. division b. product)line c. sales territory d. All of these. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 90. -onsider the follo6ing portion of a segmented income statement for the year ?ust ended. Assume fixed expenses of ivision Q include H8>7>>> of direct expenses and that the discontinuance of the department 6ill not affect the sales of the other departments nor reduce the common expenses.
Sales Variable costs ,ross profit "ixed expenses Fdirect and selling and administrativeG $perating income FlossG Chat is Q5s divisional segment marginE a. FH1>7>>>G b. H9>7>>> c. H1>7>>> d. H1>>7>>>
ivision Q H1>>7>>> ;>7>>> H 9>7>>> >7>>> H F1>7>>>G
ANS: S*PP$+T!N, -A'-*'AT!$NS: H9>7>>> − H8>7>>> I H1>7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1 min. 98. ,rass Valley ining mines three products. ,old ore sells for H17>>> per ton7 variable costs are H9>> per ton7 and fixed mining costs are H0>7>>>. 'ast year the segment margin 6as HF1>>7>>>G. o6 many tons of gold ore did ,rass Valley ining sell last yearE a. 8 tons b. 17>>> tons c. 0> tons d. 0>> tons ANS: S*PP$+T!N, -A'-*'AT!$NS: Segment margin plus direct fixed costs e@uals contribution margin. Therefore7 FH1>>7>>>G J H0>7>>> I H1>7>>> H1>7>>>2H;>> I 0> tons PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. ig(re 8)*4+ Nauman -ompany has the follo6ing information pertaining to its t6o divisions for last year:
Variable selling and admin. expenses irect fixed expenses Sales irect fixed selling and admin. expenses Variable expenses
5ivision 6 H >7>>> 87>>> 0>>7>>> 8>7>>> 9>7>>>
-ommon expenses are H097>>> for the year. 99. +efer to "igure ()1>. Chat is the segment margin for ivision 4E a. H81>7>>> b. H01>7>>> c. H09>7>>> d. H9>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: H9>>7>>> − H=>7>>> − H1>>7>>> − H>7>>> − H1>>7>>> I H9>7>>>
5ivision 7 H =>7>>> 1>>7>>> 9>>7>>> >7>>> 1>>7>>>
PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 9. +efer to "igure ()1>. Chat is the income for Nauman -ompanyE a. H;7>>> b. H807>>> c. H8>>7>>> d. H917>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: Segment income for 4: H9>>7>>> − H=>7>>> − H1>>7>>> − H>7>>> − H1>>7>>> I H9>7>>> Segment income for Q: H0>>7>>> − H>7>>> − H87>>> − H8>7>>> − H9>7>>> I H07>>> !ncome for Nauman -ompany I H07>>> J H9>7>>> − H097>>> I H917>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. ig(re 8)**+ Tyler -ompany has the follo6ing information pertaining to its t6o product lines for last year:
Variable selling and admin. expenses irect fixed expenses Sales irect fixed selling and admin. expenses Variable expenses $perating income
'rod(2t A H8(7>>> 1=7>> 0>7>>> 8(7>>> 907>>> H1107>>
'rod(2t H817>>> 897>> 01>7>>> 007>>> 817>>> H=17>>
-ommon expenses are H1>7>>> for the year. 9;. +efer to "igure ()11. Chat is the segment margin for Product %E a. H17>>> b. H1>7>>> c. H(7>>> d. H=17>> ANS: S*PP$+T!N, -A'-*'AT!$NS: H01>7>>> ) H817>>> ) H897>> ) H007>>> ) H817>>> I H=17>> PTS: 1 !": ifficulty: #asy $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application
N$T: 0 min. 9. +efer to "igure ()11. Chat is the income for Tyler -ompanyE a. H1>17>>> b. H10>7>> c. H==7>>> d. H1>07>> ANS: S*PP$+T!N, -A'-*'AT!$NS: H1107>> J H=17>> ) H1>7>>> I H==7>>> PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. ig(re 8)*+ Assume the follo6ing information for a product line:
Sales Variable expenses irect fixed expenses Variable selling and administrative expenses irect fixed selling and admin. expenses
H>>7>>> 1(7>>> 117>>> >7>>> =>7>>>
9(. +efer to "igure ()10. Chat is the contribution margin of the product lineE a. H9>>7>>> b. H07>>> c. H997>>> d. H17>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: H>>7>>> ) H1(7>>> ) H>7>>> I H997>>> PTS: 1 !": ifficulty: #asy $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 9=. +efer to "igure ()10. Chat is the segment margin of the product lineE a. H0>>7>>> b. H807>>> c. H8>7>>> d. H09>7>>> ANS: S*PP$+T!N, -A'-*'AT!$NS: H997>>> ) H0>7>>> I H09>7>>> PTS: 1
!":
ifficulty: #asy
$%&: '$: ()0
NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. >. The t6o ma?or costs associated 6ith inventory are a. ordering costs and setup costs. b. setup costs and stoc
PTS: 1 !": ifficulty: #asy NAT: %*SP+$,: Analytic
STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. 9. Chich of the follo6ing is not a traditional reason for carrying inventoryE a. to satisfy customer demand b. to avoid shutting do6n manufacturing facilities c. to buffer against unreliable production processes d. to hedge against future price increases e. all of these are traditional reasons for carrying inventory ANS: # PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . The formula for ordering cost is the a. number of orders per year × cost of placing an order. b. number of orders per year2cost of placing an order. c. average number of units in inventory × cost of carrying one unit in inventory. d. average number of units in inventory2cost of carrying one unit in inventory. e. ordering cost J carrying cost. ANS: A PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ;. The formula for total carrying cost is a. number of orders per year × cost of placing an order. b. number of orders per year2cost of placing an order. c. average number of units in inventory × cost of carrying one unit in inventory. d. average number of units in inventory2cost of carrying one unit in inventory. e. ordering cost J carrying cost. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. . The economic order @uantity F#$RG is the @uantity that a. minimies total ordering cost. b. maximies total profit. c. minimies total inventory)related costs. d. maximies carrying costs. e. maximies ease of ordering. ANS: PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge
N$T: 1 min. (. -arter -ompany orders 0> units at a time7 and places 1 orders per year. Total ordering cost is H17;>> and total carrying cost is H170>. Chich of the follo6ing statements is trueE a. The economic order @uantity F#$RG is 0>. b. The economic order @uantity F#$RG is more than 0>. c. The economic order @uantity F#$RG is less than 0>. d. Total inventory)related cost is lo6er than it 6ould be at the economic order @uantity F#$RG. e. None of these. ANS: % PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. =. -arter -ompany orders 0> units at a time7 and places 1 orders per year. Total ordering cost is H171>> and total carrying cost is H17>. Chich of the follo6ing statements is trueE a. The economic order @uantity F#$RG is 0>. b. The economic order @uantity F#$RG is more than 0>. c. The economic order @uantity F#$RG is less than 0>. d. Total inventory)related cost is lo6er than it 6ould be at the economic order @uantity F#$RG. e. None of these. ANS: PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ;>. -arter -ompany orders 0> units at a time7 and places 1 orders per year. Total ordering cost is H171>> and total carrying cost is H171>>. Chich of the follo6ing statements is trueE a. The economic order @uantity F#$RG is 0>. b. The economic order @uantity F#$RG is more than 0>. c. The economic order @uantity F#$RG is less than 0>. d. Total inventory)related cost is lo6er than it 6ould be at the economic order @uantity F#$RG. e. None of these. ANS: A PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ;1. Chen the economic order @uantity F#$RG model is applied to units produced 6ithin the company7 ordering costs become a. setup costs. b. stoc
ANS: A PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ;0. *nder a &!T system7 a. customer demand pulls units through the production line. b. safety stoc< is set at relatively high levels. c. stoc of total production levels. e. production is set at a level to maximie factory output. ANS: A PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: 3no6ledge N$T: 1 min. ;8. &!T responds to the problems traditionally solved by carrying inventories by a. ensuring that sufficient inventory is on hand to prevent stoc
;9. +efer to "igure ()8. artin has decided to begin ordering 9> units at a time. Chat is the average annual carrying cost of artin5s ne6 policyE a. H(> b. H;> c. H1;> d. H9 e. H=> ANS: A Annual carrying cost I F9>20G x H9 I H(> PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1 min.
;. +efer to "igure ()8. artin has decided to begin ordering 9> units at a time. Chat is the average annual ordering cost of artin5s ne6 policyE a. H1=> b. H1> c. H10 d. H1>> e. H19 ANS: Average annual order cost I F;029>G x H( I H10 PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1 min. ;;. +efer to "igure ()8. Chat is the #$R for artinE a. 1>> b. > c. 9 d. 8> e. 0> ANS: % #$R I √F0 x ;0 x (G29O I > PTS: 1 !": ifficulty: #asy $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0 min. 'R&!EM
1. 'ast year7 %a7>>> units and sold 0(7>>> units. %eginning inventory 6as ero. uring the period7 the follo6ing costs 6ere incurred: !ndirect labor FvariableG !ndirect materials FvariableG $ther variable overhead "ixed manufacturing overhead "ixed administrative expenses "ixed selling expenses Variable selling expenses7 per unit irect labor7 per unit irect materials7 per unit Re:(ired; -ompute the dollar amount of ending inventory using: A. Absorption costing %. Variable costing
ANS:
H ;>7>>> 8>7>>> =>7>>> 1(>7>>> 1>7>>> 10>7>>> 9> (> 0>
A.
%.
Variable costs: irect materials irect labor !ndirect labor !ndirect materials $ther variable overhead Variable product costs per unit "ixed manufacturing overhead Total product costs per unit !nventory units !nventory value
0>.>> (>.>> 0.>> 1.>> 8.>> H 1>;.>> ;.>> H 110.>> 07>>> H0097>>>
Variable product costs per unit !nventory units !nventory value
H 1>;.>> 07>>> H0107>>>
H
PTS: 1 !": ifficulty: oderate $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: min. 0. uring the most recent year7 %oston -orp. had the follo6ing data: %eginning inventory in units *nits produced *nits sold FH10 per unitG Variable costs per unit: irect materials irect labor Variable overhead "ixed costs: "ixed overhead per unit produced "ixed selling and administrative
) 179>> (70>> H H H
18 1; (
H 08 H 1(7>>>
Re:(ired; A. o6 many units are in ending inventoryE %. *sing absorption costing7 calculate the per)unit product cost. Chat is the value of ending inventoryE -. *sing variable costing7 calculate the per)unit product cost. Chat is the value of ending inventoryE . Prepare an income statement using absorption costing. #. Prepare an income statement using variable costing.
ANS: A. %eginning units J units produced )units sold 70>> units %. irect materials irect labor
H H
18 1;
Variable overhead "ixed overhead per unit produced Total product cost
H H
( 08
H
;>
#nding inventory value I H;> x 70>> I
9807>>>
-. irect materials irect labor Variable overhead Total product cost #nding inventory value I H8 x 70>> I
H H H
18 1; (
H
8 0;;79>>
. %oston -orp. Absorption)-osting !ncome Statement "or the ost +ecent 4ear Sales 'ess: -ost of goods sold
17>07>>> 9=07>>>
,ross margin 'ess: Selling and administrative expenses
887>>> 1(7>>>
$perating income
89(7>>>
#. %oston -orp. Variable)-osting !ncome Statement "or the ost +ecent 4ear Sales 'ess: -ost of goods sold ,ross margin 'ess: fixed expenses: $verhead Selling and administrative expenses $perating income
17>07>>> 8>879>> 017;>> 8970>> 1(7>>>
8=70>> 1(079>>
PTS: 1 !": ifficulty: -hallenging $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1> min. 8. The variable costing income statement for &ac11 is as follo6s: Sales F7>>> unitsG
H1>>7>>>
Variable expenses: -ost of goods sold Selling F1> of salesG -ontribution margin "ixed expenses: anufacturing overhead Administrative $perating income
H8>7>>> 1>7>>>
9>7>>> H ;>7>>>
H097>>> 1979>>
8(79>> H 017;>>
Selected data for 0>11 concerning the operations of the company are as follo6s: %eginning inventory *nits produced
)>) units (7>>> units
anufacturing costs: irect labor irect materials Variable overhead
H8.>> per unit 1.;> per unit 1.9> per unit
Re:(ired; Prepare an absorption costing income statement for 0>11.
ANS: 1a2
Sales 'ess cost of goods sold: 7>>> × H8.>> J H1.;> J H1.9> J FH097>>>2(7>>>GOU ,ross profit 'ess operating expenses: Selling expenses Administrative expenses $perating income
H1>>7>>> 97>>> H 7>>> H1>7>>> 1979>>
0979>> H 8>7;>>
PTS: 1 !": ifficulty: -hallenging $%&: '$: ()1 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)>=)"inancial Statements / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1> min. 9. Prepare a segmented income statement for ario -o. for the coming year7 using variable costing.
Sales Variable cost of goods sold irect fixed overhead
!eather =a27>>> 1897>>> 0=7>>>
"(ede =a2>> 0187>>> 8(7>>>
A sales commission of 0 of sales is paid for each of the t6o product lines. irect fixed selling and administrative expense 6as estimated to be H807>>> for the leather ?ac>> for the suede ?ac>> and common selling and administrative expense 6as estimated to be H197>>>.
Re:(ired; Prepare a segmented income statement for ario -o. for the coming year7 using variable costing.
ANS: Mario Co+ "egmented In2ome "tatement or the Coming 7ear
Sales Variable cost of goods sold Variable selling expense
!eather =a27>>> 1897>>> =7>>>
"(ede =a2>> 0187>>> 1>7(9>
Total ==07>>> 897>>> 1=7(9>
-ontribution margin 'ess: direct fixed expenses: irect fixed overhead irect selling and administrative
8>7>>>
81(71;>
;071;>
0=7>>> 807>>>
8(7>>> ;;7>>>
;7>>> =(7>>>
Segment margin
09;7>>>
01971;>
9;>71;>
'ess: common fixed expenses: -ommon fixed overhead -ommon selling and administrative
(87>>> 197>>>
$perating income
8;871;>
PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1 min. . ario -o. produces three products: '-7 -7 3P-. "or the coming year they expect to produce 1;>7>>> units. $f these7 ;7>>> 6ill be '-7 9>7>>> 6ill be - and 7>>> 6ill be 3P-. The follo6ing information 6as provided for the coming year:
Price *nit direct materials *nit direct labor *nit variable overhead *nit variable selling expense Total direct fixed overhead
H
!MC > 0> 1(> ;> 9 09>7>>>
H
5MC (;> 9> 01> 0 ;> 907>>>
H
>'C ;0 8>> 0> ( 9>>7>>>
-ommon fixed overhead is H=(97>>> and fixed selling and administrative expenses for ario -o. is H((17>>> per year. Re:(ired; A. -alculate the unit variable cost under variable costing. %. -alculate the unit variable product cost. -. Prepare a segmented variable)costing income statement for next year.
. Should ario -o.
H H H H
!MC 0> 1(> ;> 9
Total variable cost
H
8
H H H H
5MC 9> 01> 0 ;>
H H H H
>'C 8>> 0> (
H
9
H
;1(
%. !MC
5MC
>'C
*nit direct materials *nit direct labor *nit variable overhead
H H H
0> 1(> ;>
H H H
9> 01> 0
H H H
8>> 0>
Total unit variable product cost
H
9=>
H
;(
H
;>
-. Sales
!MC 87>7>>>
5MC 8979>>7>>>
>'C 89787>>>
Total 1>9707>>>
Variable cost of goods sold Variable selling expense
817(>7>>> 07=07>>>
079(>7>>> 079>>7>>>
8>7(>>7>>> 871=>7>>>
=>718>7>>> (717>>>
-ontribution margin 'ess: direct fixed overhead
=7>>> 09>7>>>
970>7>>> 907>>>
8(7>>> 9>>7>>>
7((>7>>> 17>;7>>>
Segment margin 'ess: common fixed expenses: -ommon fixed overhead
87>>>
97>=7>>>
F17>>>G
97(17>>> =(97>>>
-ommon selling and administrative
((17>>>
$perating income
07=>7>>>
. The company should consider dropping the 3P- product line because it has a negative segment margin. PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)+eporting / !A: -ost anagement / A-%SP: AP-)0) anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 0> min. ;. #llie anufacturing -ompany produces three products: A7 %7 and -. The income statement for most recent year is as follo6s: Sales 'ess: Variable cost -ontribution margin 'ess fixed cost: anufacturing Selling and administrative
H0>>7>>> 107>>> H 87>>> H0>7>>> 197>>>
897>>>
$perating income
H 8=7>>>
The sales7 contribution margin ratios7 and direct fixed expenses for the three types of products are as follo6s:
Sales -ontribution margin ratio irect fixed expenses of products
A H;>7>>> 8 H (7>>>
H9>7>>> 8> H 7>>>
C H1>>7>>> 9> H97>>>
Re:(ired; Prepare income statements segmented by products. !nclude a column for the entire firm in the statement.
ANS:
Sales 'ess: Variable expenses -ontribution margin 'ess: irect fixed exp. Product margin 'ess: -ommon expenses
Ellie Man(?a2t(ring Company In2ome "tatement or the Most Re2ent 7ear A H;>7>>> H9>7>>> 8=7>>> 0(7>>> H017>>> H107>>> (7>>> 7>>> H187>>> H 7>>>
C H1>>7>>> ;>7>>> H 9>7>>> 97>>> H 8;7>>>
Total H0>>7>>> 107>>> H 87>>> 17>>> H ;7>>> 17>>> H 8=7>>>
PTS: 1 !": ifficulty: oderate $%&: '$: ()0 NAT: %*SP+$,: Analytic STA: A!-PA: "N)+eporting / !A: ecision Analysis / A-%SP: AP-)>=)"inancial Statements / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1 min. . 'aird -ompany uses 9> units of a part each year. The cost of placing one order is HK the cost of carrying one unit in inventory for a year is H0. 'aird currently orders (1 units at a time. A. %. -. . #.
The annual ordering cost of 'aird5s current policy is H @@@@@@@@@@@@@@@@@@ . The annual carrying cost of 'aird5s current policy is H @@@@@@@@@@@@@@@@@@ . The total cost of 'aird5s current policy is H @@@@@@@@@@@@@@@@@@ . Chat is the #$R for 'airdE Chat is the total inventory)related cost at the #$RE
ANS: 'aird -ompany uses 9> units of a part each year. The cost of placing one order is HK the cost of carrying one unit in inventory for a year is H0. 'aird currently orders (1 units at a time. A. %. -. . #.
Annual ordering cost I F9>2(1G × H I H0 Annual carrying cost I F(120G × H0 I H(1 Total cost of 'aird5s current policy I H0 J H(1I H1>; #$R I √F0 × 9> × HG20O I 9 Total inventory)related cost I FH × =G J F920G × H0O I H=>
PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling /A!-PA: "N)easurement / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1> min. (. Simon -ompany sells =>> units of its deluxe product each year. The cost of setting up for one production run is H1>K the cost of carrying one unit in inventory for a year is H8. A. %. -. .
Chat is the economic order @uantityE Chat is the annual setup cost of the #$R policyE Chat is the annual carrying cost of the #$R policyE Chat is the total inventory)related cost of the #$R policyE
ANS: A. %. -. .
#$R I √F0 × =>> × H1>G28O I 8>> Annual setup cost I F=>>28>>G × H1> I H9> Annual carrying cost I F8>>20G × H8I H9> Total cost of the #$R policy I H9> J H9> I H=>>
PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: min. =. Simon -ompany sells =>> units of its deluxe product each year. The cost of setting up for one production run is H1>K the cost of carrying one unit in inventory for a year is H8. Simon currently produces 1>> deluxe units in one production run. A. %. -. .
Chat is the annual setup cost of the current policyE Chat is the annual carrying cost of the current policyE Chat is the total inventory)related cost of the current policyE o you suppose that the current production run is smaller or larger than the #$RE ChyE
ANS: A. %. -. .
Annual setup cost I F=>>21>>G × H1> I H178> Annual carrying cost I F1>>20G × H8I H1> Total cost of the current policy I H178> J H1> I H17>> The #$R must be more than 1>> units because the set up cost for batches of 1>> units is higher than the carrying cost.
PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)ecision odeling /A!-PA: "N)easurement / !A: ecision Analysis / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Analysis N$T: min. 1>. +udd -ompany uses 9>7>>> micro)chips each year in its production of digital cameras. The cost of placing an order is H. The cost of holding one unit of inventory for one year is H(. -urrently +udd places 0> orders of 07>>> units per order.
Re:(ired; A. -ompute the annual ordering cost. %. -ompute the annual carrying cost. -. -ompute the total cost of +udd5s current inventory policy. . -ompute the economic order @uantity. #. -ompute the order cost and the carrying cost for the #$R. ". o6 much money does using the #$R policy save the company over the policy of purchasing 07>>> micro)chips per orderE
ANS: A. 0> orders x H per order I H17>> %. H( F07>>>20G I H(7>>> -. Total cost I carrying cost J ordering cost H17>> J H(7>>> I H=7>> .
√F0 × 9>7>>> × HG2H(O I (;;.>0
#. 9;.1= x H I H879;9 ordering cost H( F(;;20G I H879;9 carrying cost total cost I H879;9 J H8797;9 I H;7=0( ". H=7>> ) H;7=0( I H070 savings PTS: 1 !": ifficulty: oderate $%&: '$: ()8 NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 1> min. 11. c3ay -ompany produces curling irons. The plastic handles used to produce the curling irons are purchased from an outside supplier. #ach year7 97>>> handles are used at the rate of 1> handles per day. Some days as many as 1(> handles are used. $n average it ta
ANS: A. +eorder point 6ithout safety stoc< I average daily rate x lead time 1> x 9 I ;>> %. Safety stoc< I Fmaximum daily rate ) average daily rateG x lead time F1(> ) 1> G x 9 I 10> -. +eorder point 6ith safety stoc< I reorder point 6ithout safety stoc< J safety stoc< ;>> J 10> I 0> PTS: 1
!":
ifficulty: oderate
$%&: '$: ()8
NAT: %*SP+$,: Analytic STA: A!-PA: "N)easurement /A!-PA: "N)ecision odeling / !A: -ost anagement / A-%SP: AP-)0)anagerial Accounting "eatures2-osts 3#4: %loom5s: Application N$T: 8 min. E""A7
1. Chat is the difference bet6een absorption)costing income and variable)costing incomeE ANS: The difference bet6een absorption)costing income and variable)costing income is the treatment of fixed factory overhead. Absorption costing attaches fixed factory overhead to each unit produced. !f the unit is sold7 that portion of fixed factory overhead becomes part of -ost of ,oods Sold. !f the unit goes into inventory7 it ta
0. 4ou have ?ust become the controller for Artisan !ndustries. Artisan produces three different products and upon revie6 of their internal reports you notice that they have never prepared a segmented income statement. #xplain to the vice president 6hat a segmented income statement consists of and 6hy it can be useful in decision ma min. 8. 'ist three problems inventory 6as meant to solve. o6 does the &!T producer handle these problemsE ANS: Problems 6ith inventory:
