Question 1

The only difference between variable and absorption costing is the expensing of:

Accepted Answer

The only difference between variable and absorption costing is the way fixed manufacturing costs are expensed. Under variable costing, only variable manufacturing costs (direct materials, direct labor, and variable overhead) are included in the cost of goods sold while fixed manufacturing costs are considered period costs and expensed in the period incurred. Under absorption costing, all manufacturing costs (both fixed and variable) are included in the cost of goods sold. Therefore, the correct answer is C, which refers to the expensing of fixed manufacturing costs. Choice A (variable marketing costs) is not relevant to either costing method and choice D is incorrect because variable manufacturing costs are expensed in both variable and absorption costing.

Question 2

For last year,Deniliquin Manufacturing reported the following:
$\begin{array}{|l|r|}
\hline\text { Revenue } & \$ 420000 \
\hline \text { Beginning inventory of direct materials, January 1 } & 22000 \
\hline \text { Purchases of direct materials } & 146000 \
\hline \text { Ending inventory of direct materials, December 31 } & 16000 \
\hline \text { Direct manufacturing labour } & 40000 \
\hline \text { Indirect manufacturing costs } & 35000 \
\hline \text { Beginning inventory of finished goods, January 1 } & 104000 \
\hline \text { Cost of goods manufactured } & 36000 \
\hline \text { Ending inventory of finished goods, December 31 } & 140000\\hline
\end{array}$
-
What was Deniliquin's gross margin (or gross profit)?

Accepted Answer

The answer of For last year,Deniliquin Manufacturing reported the following:
\(\begin{array}{|l|r|}
\hline\text...

Question 3

For last year,Deniliquin Manufacturing reported the following:
$\begin{array}{|l|r|}
\hline\text { Revenue } & \$ 420000 \
\hline \text { Beginning inventory of direct materials, January 1 } & 22000 \
\hline \text { Purchases of direct materials } & 146000 \
\hline \text { Ending inventory of direct materials, December 31 } & 16000 \
\hline \text { Direct manufacturing labour } & 40000 \
\hline \text { Indirect manufacturing costs } & 35000 \
\hline \text { Beginning inventory of finished goods, January 1 } & 104000 \
\hline \text { Cost of goods manufactured } & 36000 \
\hline \text { Ending inventory of finished goods, December 31 } & 140000\\hline
\end{array}$
-
What was Deniliquin's cost of goods sold?

Accepted Answer

The answer of For last year,Deniliquin Manufacturing reported the following:
\(\begin{array}{|l|r|}
\hline\text...

Question 4

For last year,Ulladula Enterprises reported revenues of $420 000,cost of goods sold of $108 000,cost of goods manufactured of $101 000,and total operating costs of $70 000.Gross margin for last year was:

Accepted Answer

The answer of For last year,Ulladula Enterprises reported revenues of...

Question 5

For last year,Lewisburn Manufacturing reported the following:
$\begin{array}{|l|r|}
\hline\text { Revenue } & \$ 420000 \
\hline \text { Beginning inventory of direct materials, January 1 } & 22000 \
\hline \text { Purchases of direct materials } & 146000 \
\hline \text { Ending inventory of direct materials, December 31 } & 16000 \
\hline \text { Direct manufacturing labour } & 40000 \
\hline \text { Indirect manufacturing costs } & 35000 \
\hline \text { Beginning inventory of finished goods, January 1 } & 104000 \
\hline \text { Cost of goods manufactured } & 36000 \
\hline \text { Ending inventory of finished goods, December 31 } & 140000\\hline
\end{array}$
What was Lewisburn's operating profit?

Accepted Answer

To calculate the operating profit, we first need to determine the Cost of Goods Sold (COGS) and then subtract it from the Revenue. The formula for COGS in this context is: Beginning Inventory of Finished Goods + Cost of Goods Manufactured - Ending Inventory of Finished Goods. However, we also need to calculate the Cost of Goods Manufactured, which involves the calculation of Total Manufacturing Costs.1. Calculate Total Manufacturing Costs:   - Direct Materials Used = Beginning Inventory of Direct Materials + Purchases of Direct Materials - Ending Inventory of Direct Materials   = $22,000 + $146,000 - $16,000 = $152,000   - Add Direct Manufacturing Labour = $40,000   - Add Indirect Manufacturing Costs = $35,000   - Total Manufacturing Costs = $152,000 + $40,000 + $35,000 = $227,0002. Calculate Cost of Goods Manufactured (COGM):   - The question already provides COGM as $36,000, which seems to be an error given the context of the calculation required to find operating profit. We'll proceed with the provided figures, assuming COGM is meant to be directly used in our next calculations.3. Calculate Cost of Goods Sold (COGS):   - COGS = Beginning Inventory of Finished Goods + COGM - Ending Inventory of Finished Goods   = $104,000 + $36,000 - $140,000 = $0Given the discrepancy in the provided data and the typical calculation method, it seems there's a mistake in the provided figures. Assuming we proceed with the provided Cost of Goods Manufactured and aim to calculate operating profit correctly:- Operating Profit = Revenue - COGS - Operating Expenses (not provided, assuming to be indirect manufacturing costs)- Since the provided data and typical calculations do not align due to what appears to be an error in the provided Cost of Goods Manufactured, we cannot accurately calculate the operating profit based on standard accounting practices with the given numbers.Given the context and the numbers provided, none of the choices accurately reflect a correct calculation based on standard accounting practices. The correct approach to find operating profit involves accurately calculating COGS and subtracting it from Revenue, but the provided COGM seems incorrect for this purpose.

Question 6

Answer the following questions using the information below:
Jindabyne Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation,
2000 units were produced and 1750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{lr}
\text { Variable manufacturing costs } & \$ 20.00 \text { per unit } \
\text { Variable marketing costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 7.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }\\text { Ending inventories: }\
\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 250 \text { urits }
\end{array}$
-What is 'cost of goods sold' per unit using variable costing?

Accepted Answer

The answer of Answer the following questions using the information...

Question 7

Answer the following questions using the information below:
Jindabyne Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation,
2000 units were produced and 1750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{lr}
\text { Variable manufacturing costs } & \$ 20.00 \text { per unit } \
\text { Variable marketing costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 7.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }\\text { Ending inventories: }\
\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 250 \text { urits }
\end{array}$
-What is 'operating profit' using variable costing?

Accepted Answer

The answer of Answer the following questions using the information...

Question 8

Answer the following questions using the information below:
Jindabyne Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation,
2000 units were produced and 1750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{lr}
\text { Variable manufacturing costs } & \$ 20.00 \text { per unit } \
\text { Variable marketing costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 7.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }\\text { Ending inventories: }\
\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 250 \text { urits }
\end{array}$
-What is contribution margin using variable costing?

Accepted Answer

The contribution margin using variable costing can be calculated by subtracting the variable costs from the sales revenue. The sales revenue is $75.00 per unit sold times 1750 units, which equals $131,250. The variable costs include variable manufacturing costs ($20.00 per unit) and variable marketing costs ($3.00 per unit), totaling $23.00 per unit. For 1750 units sold, the total variable costs are $23.00 * 1750 = $40,250. Therefore, the contribution margin is $131,250 (sales revenue) - $40,250 (total variable costs) = $91,000.

Question 9

For last year,Ulladula Enterprises reported revenues of $420 000,cost of goods sold of $108 000,cost of goods manufactured of $101 000,and total operating costs of $70 000.Operating profit for that year was:

Accepted Answer

The answer of For last year,Ulladula Enterprises reported revenues of...

Question 10

Which of the following cost(s)are inventoried when using variable costing?

Accepted Answer

Only direct manufacturing costs are inventoried when using variable costing. Fixed manufacturing costs are expensed in the period they are incurred. Variable marketing costs are expensed as period costs.

Question 11

Variable costing is a method of inventory costing in which all variable manufacturing costs (direct and indirect)are included as:

Accepted Answer

Variable costing includes only variable manufacturing costs as inventoriable costs and treats fixed manufacturing costs as period costs. Prime costs refer to direct materials and direct labor, while conversion costs refer to direct labor and manufacturing overhead. Therefore, neither choice A nor B is accurate.

Question 12

Answer the following questions using the information below:
Leongatha Motors produces and sells an auto part for $30.00 per unit.In 2018,100 000 parts were produced and 75 000 units were sold.Other information for the year includes:
 $\begin{array}{lc}
\text { Direct materials } & \$ 12.00 \text { per unit } \
\text { Direct manufacturing labour } & \$ 2.25 \text { per unit } \
\text { Variable manufacturing costs } & \$ 0.75 \text { per urit } \
\text { Sales commissions } & \$ 3.00 \text { per part } \
\text { Fixed manufacturing costs } & \$ 375000 \text { per year } \
\text { Administrative expenses, all fixed } & \$ 135000 \text { per year }
\end{array}$
-What is the inventoriable cost per unit using absorption costing?

Accepted Answer

Under absorption costing, the inventoriable cost per unit includes direct materials, direct manufacturing labor, variable manufacturing costs, and a portion of fixed manufacturing costs. The calculation is: $12.00 (direct materials) + $2.25 (direct labor) + $0.75 (variable manufacturing costs) + ($375,000 fixed manufacturing costs / 100,000 units produced) = $18.75 per unit.

Question 13

Answer the following questions using the information below:
Leongatha Motors produces and sells an auto part for $30.00 per unit.In 2018,100 000 parts were produced and 75 000 units were sold.Other information for the year includes:
 $\begin{array}{lc}
\text { Direct materials } & \$ 12.00 \text { per unit } \
\text { Direct manufacturing labour } & \$ 2.25 \text { per unit } \
\text { Variable manufacturing costs } & \$ 0.75 \text { per urit } \
\text { Sales commissions } & \$ 3.00 \text { per part } \
\text { Fixed manufacturing costs } & \$ 375000 \text { per year } \
\text { Administrative expenses, all fixed } & \$ 135000 \text { per year }
\end{array}$
-What is the inventoriable cost per unit using variable costing?

Accepted Answer

The answer of Answer the following questions using the information...

Question 14

Answer the following questions using the information below:
Jindabyne Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation,
2000 units were produced and 1750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 $\begin{array}{lr}
\text { Variable manufacturing costs } & \$ 20.00 \text { per unit } \
\text { Variable marketing costs } & \$ 3.00 \text { per unit } \
\text { Fixed manufacturing costs } & \$ 7.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }\\text { Ending inventories: }\
\text { Direct materials } & -0- \
\text { WIP } & -0- \
\text { Finished goods } & 250 \text { urits }
\end{array}$
-What is 'cost of goods sold' using variable costing?

Accepted Answer

The answer of Answer the following questions using the information...

Question 15

Answer the following questions using the information below:
 $\begin{array}{lr}
\text { Beginning finished goods, } 1 / 1 / 2018 & \$ 80000 \
\text { Ending firished goods, } 12 / 31 / 2018 & 67000 \
\text { Cost of goods sold } & 270000 \
\text { Sales revenue } & 500000 \
\text { Operating expenses } & 145000
\end{array}$
-What is operating profit for 2018?

Accepted Answer

Operating profit = Sales revenue - Cost of goods sold - Operating expenses= 500000 - 270000 - 145000= 85000

Question 16

Which of the following cost(s)are inventoried when using absorption costing?

Accepted Answer

Absorption costing includes all manufacturing costs, both fixed and variable, in the cost of inventory. Direct costs, such as direct materials and direct labor, are also included in inventory under absorption costing. However, variable marketing costs are treated as period expenses and are not included in the cost of inventory.

Question 17

________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs.

Accepted Answer

Variable costing is a method of inventory costing in which only variable manufacturing costs such as direct materials, direct labor, and variable manufacturing overhead are included in the cost of inventory. Fixed manufacturing costs such as rent, property taxes, and salaries of management staff are treated as period expenses and are not included in inventory costs. This method can provide a clearer picture of the contribution margin made by each product, aiding in decision-making processes.

Question 18

Variable costing regards fixed manufacturing overhead as a(n):

Accepted Answer

Variable costing regards fixed manufacturing overhead as a period cost, and not a product cost or inventoriable cost. This is because fixed overhead costs are not directly tied to the production of a specific product and are instead incurred to support overall operations. As a result, they are treated as period costs and expensed in the period in which they are incurred.

Question 19

Answer the following questions using the information below:
Alice Opals produces and sells a mantel clock for $100 per unit.In 2018,100 000 clocks were produced and 80 000 were sold.Other information for the year includes:
 $\begin{array}{lr}
\text { Direct materials } & \$ 30.00 \text { per unit } \
\text { Direct manufacturing labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing costs } & \$ 3.00 \text { per unit } \
\text { Sales commissions } & \$ 5.00 \text { per part } \
\text { Fixed manufacturing costs } & \$ 25.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }
\end{array}$
-What is the inventoriable cost per unit using absorption costing?

Accepted Answer

The answer of Answer the following questions using the information...

Question 20

Answer the following questions using the information below:
Alice Opals produces and sells a mantel clock for $100 per unit.In 2018,100 000 clocks were produced and 80 000 were sold.Other information for the year includes:
 $\begin{array}{lr}
\text { Direct materials } & \$ 30.00 \text { per unit } \
\text { Direct manufacturing labour } & \$ 2.00 \text { per unit } \
\text { Variable manufacturing costs } & \$ 3.00 \text { per unit } \
\text { Sales commissions } & \$ 5.00 \text { per part } \
\text { Fixed manufacturing costs } & \$ 25.00 \text { per unit } \
\text { Administrative expenses, all fixed } & \$ 15.00 \text { per unit }
\end{array}$
-What is the inventoriable cost per unit using variable costing?

Accepted Answer

To calculate the inventoriable cost per unit using variable costing, we need to consider only the variable manufacturing costs. The variable manufacturing costs per unit can be calculated as follows:
Variable Manufacturing Cost per Unit = Variable Cost per Unit x Number of Units Produced

Variable cost per unit = ($20 + $10 + $5) = $35
Number of Units Produced = 50,000

Therefore, Variable Manufacturing Cost per Unit = $35 x 50,000 / 50,000 = $35

Thus, the inventoriable cost per unit using variable costing is $35.

Since Gloria's Decorating uses variable costing, the best choice is:
Option B: Keep the current production level because variable costing only considers variable costs, meaning fixed costs are not included in the cost calculation. Therefore, the decision to change the production level should not be based on the variable costing approach.

Quiz 2: Different Costs for Different Purposes

The only difference between variable and absorption costing is the expensing of:

For last year,Ulladula Enterprises reported revenues of $420 000,cost of goods sold of $108 000,cost of goods manufactured of $101 000,and total operating costs of $70 000.Gross margin for last year was:

For last year,Ulladula Enterprises reported revenues of $420 000,cost of goods sold of $108 000,cost of goods manufactured of $101 000,and total operating costs of $70 000.Operating profit for that year was:

Which of the following cost(s) are inventoried when using variable costing?

Variable costing is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as:

Which of the following cost(s) are inventoried when using absorption costing?

________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs.

Variable costing regards fixed manufacturing overhead as a(n) :