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Exam 8: Variable Costing and the Costs of Quality and Sustainability

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Question 21

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The following data relate to Lebeaux Corporation for the year just ended: Which of the following statements is correct?

A) Lebeaux's variable-costing income statement would show a gross margin of $270,000.
B) Lebeaux's variable costing income statement would show a contribution margin of $330,000.
C) Lebeaux's absorption-costing income statement would show a contribution margin of $330,000.
D) Lebeaux's absorption costing income statement would show a gross margin of $330,000.
E) Lebeaux's absorption-costing income statement would show a gross margin of $145,000.

F) A) and D)
G) A) and E)

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Question 22

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The optimum level of product quality is where:

A) external failure costs are at a minimum.
B) total quality costs are at a minimum.
C) prevention costs are at a minimum.
D) internal failure costs are at a minimum.
E) all of the answers are correct.

F) C) and E)
G) B) and C)

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Question 23

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Which of the following formulas can often reconcile the difference between absorption- and variable-costing income?

What is the difference between a product's quality of design and its quality of conformance?

All of the following costs are inventoried under absorption costing except:

Consider the following statements about absorption costing and variable costing: I. Variable costing is consistent with contribution reporting and cost-volume-profit analysis. II. Variable costing must be used for external financial reporting. III. A number of companies use both absorption costing and variable costing. Which of the above statements is (are) true?

Fixed manufacturing overhead is not inventoried under absorption costing.

All of the following are inventoried under absorption costing except:

Craig Company has per-unit fixed and variable manufacturing costs of $40 and $15, respectively. Variable selling and administrative costs are $9 per unit. Consider the two independent cases that follow for the firm. Case A: Variable-costing income, $110,000; sales, 6,000 units; production, 6,000 units Case B: Variable-costing income, $178,000; sales, 7,500 units; production, 7,100 units Required: A. From a product-costing perspective, what is the basic difference between absorption costing and variable costing? B. Compute Craig's absorption-costing income in Case C. Compute Craig's absorption-costing income in Case

For external-reporting purposes, generally accepted accounting principles require that net income be based on:

Which of the following situations would cause variable-costing income to be higher than absorption-costing income?

An analytical method that aims at achieving near-perfect results in a production process is known as the zero-defect perspective.

Montana Industries has computed the following unit costs for the year just ended: Which of the following choices correctly depict amounts included in the per-unit cost of inventory under variable costing and absorption costing?

Which of the following statements about environmental costs is false?

Chu Enterprise's inventory increased during the year. On the basis of this information, income reported under absorption costing:

Information taken from Horner Corporation's May accounting records follows. Required: A. Assuming the use of variable costing, compute the inventoriable costs for the month. B. Compute the month's inventoriable costs by using absorption costing. C. Assume that anticipated and actual production totaled 20,000 units, and that 18,000 units were sold during May. Determine the amount of fixed manufacturing overhead and fixed selling and administrative costs that would be expensed for the month under (1) variable costing and (2) absorption costing. D. Assume the same data as in requirement "C." Compute the contribution margin that would be reported on a variable-costing income statement.

The difference in income between absorption and variable costing can be explained by the change in finished-goods inventory (in units) multiplied by the standard fixed manufacturing overhead rate. Required: Explain why this calculation accounts for the difference noted.

Use the following information to answer the following Questions Fort Smith Technologies incurred the following costs during the past year when planned production and actual production each totaled 20,000 units: -If Fort Smith uses absorption costing, the total inventoriable costs for the year would be:

All of the following are expensed under variable costing except:

The underlying difference between absorption costing and variable costing lies in the treatment of: