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Exam 21: Variable Costing for Management Analysis

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Question 31

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For a period during which the quantity of inventory at the end is larger than that at the beginning, operating income reported under variable costing will be larger than operating income reported under absorption costing.

A) True
B) False

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Question 32

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Under absorption costing, the amount of income reported from operations can be increased by producing more units than are sold.

A) True
B) False

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Question 33

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Philadelphia Company has the following information for March: Determine the March (a) manufacturing margin, (b) contribution margin, and (c) operating income for Philadelphia Company.

For a period during which the quantity of product manufactured equals the quantity sold, operating income reported under absorption costing will be smaller than the operating income reported under variable costing.

Jake Entertainment Corporation has three segments with revenue, operating income, and depreciation and amortization information (in millions) as follows: The EBITDA for the Theme Park segment is

A business operated at 100% of capacity during its first month and incurred the following costs: If 75 units remain unsold at the end of the month, the amount of inventory that would be reported on the absorption costing balance sheet is

EBITDA represents operating income after income tax, depreciation, and amortization have been deducted.

For a period during which the quantity of inventory at the end equals the inventory at the beginning, operating income reported under variable costing will be smaller than operating income reported under absorption costing.

On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is

In variable costing, fixed costs do not become part of the cost of goods manufactured, but they are considered an expense of the period.

Under variable costing, which of the following costs would be included in finished goods inventory?

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.

On the variable costing income statement, deduction of the variable cost of goods sold from sales yields manufacturing margin.

Under absorption costing, which of the following costs would not be included in finished goods inventory?

Match each of the following descriptions with the appropriate costing concept (a-c). -May be used in a manufacturing company A)Absorption costing only B)Variable costing only C)Both absorption and variable costing

For a period during which the quantity of product manufactured is less than the quantity sold, operating income reported under absorption costing will be larger than operating income reported under variable costing.

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: a.Prepare an income statement using absorption costing. b.Prepare an income statement using variable costing.

For a period during which the quantity of inventory at the end is larger than that at the beginning, operating income reported under variable costing will be smaller than operating income reported under absorption costing.

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 operating income is less than or greater than absorption costing operating income and (b) the difference in variable costing and absorption operating income.

Which of the following is a reason for easy identification and control of variable manufacturing costs under the variable costing method?