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Exam 8: Absorption and Variable Costing, and Inventory Management

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Question 41

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The following information pertains to Nute Corporation: $\begin{array} { l r } \text { Beginning inventory } & 1,000 \text { units } \\\text { Ending inventory } & 6,000 \text { units } \\\text { Direct labour per unit } & \$ 40 \\\text { Direct materials per unit } & 20 \\\text { Variable overhead per unit } & 10 \\\text { Fixed overhead per unit } & 30 \\\text { Variable selling and administrative costs per unit } & 6 \\\text { Fixed selling and administrative costs per unit } & 14\end{array}$ -Refer to the Figure.What is the value of the ending inventory using the absorption costing method?

A) $240,000
B) $360,000
C) $420,000
D) $600,000

E) A) and B)
F) A) and C)

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Question 42

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Which of the following types of costs does NOT appear on a variable costing income statement?

A) direct materials
B) direct labour
C) opportunity cost
D) variable selling expense

E) C) and D)
F) A) and C)

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Question 43

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Westwood Company has the following information the current year: Eastwood had no beginning inventories. $\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable production costs } & \$ 80 \text { per unit produced } \\\text { Variable selling and administrative expenses } & \$ 32 \text { per unit sold } \\\text { Fixed production costs } & \$ 400,000 \\\text { Fixed selling and administrative expenses } & \$ 280,000 \\\text { Units produced } & 20,000 \text { units } \\\text { Units sold } & 16,000 \text { units }\end{array}$ -Refer to the Figure.What is the net income for Westwood using the absorption costing method?

Theele Corporation has the following information for April, May, and June: Production costs per unit (based on 10,000 units) are as follows: $\begin{array}{lrrr} & \text { April } & \underline{\text { May }} & \text { June } \\\text { Units produced } & 10,000 & 10,000 & 10,000 \\\text { Units sold } & 7,000 & 8,500 & 10,500\end{array}$ Theele Corporation had no beginning inventories for April, and all units were sold for $55 per unit. Costs are stable over the three months. $\begin{array}{lr}\text { Direct materials } & \$ 13 \\\text { Direct labour } & 9 \\\text { Variable factory overhead } & 7 \\\text { Fixed factory overhead } & 5 \\\text { Variable selling and administrative expenses } & 10 \\\text { Fixed selling and administrative expenses } & 4\end{array}$ -Refer to the Figure.What is the April ending inventory for Theele Corporation when using the variable costing method?

Darker Company produced 30,000 units and sold 28,000 units in the current year.Beginning inventory was zero.During the period,the following costs were incurred: Required: Compute the dollar amount of ending inventory using: A. Absorption costing B. Variable costing

Absorption costing income statements and variable costing income statements may differ because of their treatment of fixed overhead costs.

On which type of income statement does each of the following costs appear? -Variable selling expense

Prairie Inc.mines three products.Gold ore sells for $1,000 per ton,variable costs are $600 per ton,and fixed mining costs are $250,000.The segment margin for the year was ($100,000) .The management of Prairie Mining was considering dropping the mining of gold ore.Only one-half of the fixed expenses are direct and would be eliminated if the segment was dropped. What were the sales in tons for the year?

Shedding Company has two divisions with the following segment margins for the current year: Northern,$400,000; Southern,$800,000.Common expenses of the company are $100,000.What is Shedding Company's net income?

What is the formula to calculate total carrying cost?

Which inventory cost can include lost sales,cost of expediting,and cost of interrupted production?

What is the relationship between absorption costing net income and variable costing net income?

Product cost includes all costs of the company.

Stimpson Company sells 900 units of its deluxe product each year.The cost of setting up for one production run is $150; the cost of carrying one unit in inventory for a year is $3. A. What is the economic order quantity? B. What is the annual setup cost of the EOQ policy? C. What is the annual carrying cost of the EOQ policy? D. What is the total inventory-related cost of the EOQ policy?

Last year, Ella Company produced 10,000 units and sold 9,000 units at a price of $9 per unit. Costs for last year were as follows: Fixed factory overhead is applied on the basis of expected production. Last year, Ella expected to produce 10,000 units. $\begin{array} { l r } \text { Direct materials } & \$ 10,000 \\\text { Direct labour } & 15,000 \\\text { Variable factory overhead } & 5,000 \\\text { Fixed factory overhead } & 20,000 \\\text { Variable selling expense } & 7,200 \\\text { Fixed selling expense } & 5,000 \\\text { Fixed administrative expense } & 12,000\end{array}$ -Refer to the Figure.What is the operating income for last year under variable costing?

On which type of income statement does each of the following costs appear? -Fixed factory overhead for the period

Westwood Company has the following information the current year: Eastwood had no beginning inventories. $\begin{array}{lr}\text { Selling price } & \$ 300 \text { per unit } \\\text { Variable production costs } & \$ 80 \text { per unit produced } \\\text { Variable selling and administrative expenses } & \$ 32 \text { per unit sold } \\\text { Fixed production costs } & \$ 400,000 \\\text { Fixed selling and administrative expenses } & \$ 280,000 \\\text { Units produced } & 20,000 \text { units } \\\text { Units sold } & 16,000 \text { units }\end{array}$ -Refer to the Figure.What is the cost of ending inventory for Westwood using the variable costing method?

Operating Company has the following information pertaining to its two divisions for the current year: Common expenses are $50,000 for the current year. $\begin{array}{lrr}&\text { North Division }&\text { South Division}\\\text { Variable selling and administrative expenses } & \$ 70,000 & \$ 90,000 \\\text { Direct fixed manufacturing expenses } & 35,000 & 100,000 \\\text { Sales } & 300,000 & 500,000 \\\text { Direct fixed selling and administrative expenses } & 30,000 & 70,000 \\\text { Variable manufacturing expenses } & 40,000 & 100,000\end{array}$ -Refer to the Figure.What is the segment margin for Division South?

Triple M Company had the following data for the month: Fixed overhead is $4,000 per month, which is applied to production on the basis of normal activity of 2,000 units. During the month, 2,000 units were produced. Loring started the month with 300 units in beginning inventory, with unit product cost equal to this month's unit product cost. A total of 2,100 units were sold during the month at price of $14 per unit. Selling and administrative expense for the month, all fixed, totalled $3,600. $\begin{array}{lr}\text { Variable costs per unit: } & \\\text { Direct materials } & \$ 4.00 \\\text { Direct labour } & 3.20 \\\text { Variable overhead } & 1.00 \\\text { Variable selling expenses } & 0.40\end{array}$ -Refer to the Figure.What is the operating income under absorption costing?

What is the formula to calculate ordering cost?