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TB - ch13 Standard Costing and Variable Costing
TB - ch13 Standard Costing and Variable Costing
Multiple Choice
d 5. Variable costing and absorption costing will show the same incomes when
there are no
a. beginning inventories.
b. ending inventories.
c. variable costs.
d. beginning and ending inventories.
c 6. ABC had the same activity in 20X3 as in 20X2 except that production was
higher in 20X3 than in 20X2. ABC will show
a. higher income in 20X3 than in 20X2.
b. the same income in both years.
c. the same income in both years under variable costing.
d. the same income in both years under absorption costing.
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d 8. Which measure of activity is likely to give the LOWEST standard fixed
cost per unit?
a. Actual activity.
b. Normal capacity.
c. Budgeted activity.
d. Practical capacity.
c 9. Which item is NOT used to compute the fixed overhead volume variance?
a. Standard fixed cost per unit.
b. Budgeted fixed overhead.
c. Actual fixed overhead.
d. Actual quantity produced.
a 11. A company that sets a standard fixed cost based on practical capacity
a. should expect unfavorable volume variances.
b. will set its selling prices too low.
c. has a higher cost per unit than a company using normal activity
to set the standard.
d. usually overapplies its fixed costs.
b 13. ABC had $400,000 budgeted fixed overhead costs and based its standard
on normal activity of 40,000 units. Actual fixed overhead costs were
$430,000, actual production was 36,000 units, and sales were 30,000
units. The volume variance was
a. $30,000.
b. $40,000.
c. $70,000.
d. $77,777.
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d 15. Calculating income under variable costing does NOT require knowing
a. unit sales.
b. unit variable manufacturing costs.
c. selling price.
d. unit production.
a 20. Which method gives the lowest inventory cost per unit?
a. Variable costing.
b. Absorption costing using normal activity to set the standard fixed
cost.
c. Absorption costing using practical capacity to set the standard
fixed cost.
d. Actual absorption costing.
b 21. Which costs are treated differently under absorption costing and
variable costing?
a. Variable manufacturing costs.
b. Fixed manufacturing costs.
c. Variable selling and administrative expenses.
d. Fixed selling and administrative expenses.
a 22. ABC Company had 15,000 units in ending inventory. The total cost of
those units under variable costing is
a. less than it is under absorption costing.
b. the same as it is under absorption costing.
c. more than it is under absorption costing.
d. any of the above.
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b 23. York Company had $200,000 income using absorption costing. York has no
variable manufacturing costs. Beginning inventory was $15,000 and
ending inventory was $22,000. Income under variable costing would have
been
a. $178,000.
b. $193,000.
c. $200,000.
d. $207,000.
c 30. ABC had the same activity in 20X4 as in 20X3 except that production was
lower in 20X4 than in 20X3. ABC will show
a. lower income in 20X4 than in 20X3.
b. the same income in both years.
c. the same income in both years under variable costing.
d. the same income in both years under absorption costing.
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a 31. Rounder Industries manufactures a single product. Variable production
costs are $20 and fixed production costs are $300,000. Rounder uses a
normal activity of 20,000 units to set its standard costs. Rounder
began the year with no inventory, produced 22,000 units, and sold
21,000 units. Ending inventory under variable costing would be
a. $20,000.
b. $30,000.
c. $35,000.
d. cannot be determined without further information.
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c 36. Rounder Industries manufactures a single product. Variable production
costs are $20 and fixed production costs are $300,000. Rounder uses a
normal activity of 20,000 units to set its standard costs. Rounder
began the year with no inventory, produced 22,000 units, and sold
21,000 units. The standard cost of goods sold under absorption costing
would be
a. $400,000.
b. $420,000.
c. $735,000.
d. some other number.
c 37. Alpha Company has a standard fixed cost of $10 per unit. At an actual
production of 16,000 units an unfavorable volume variance of $20,000
resulted. What were total budgeted fixed costs?
a. $140,000
b. $160,000
c. $180,000
d. Cannot be determined without further information.
a 38. Beta Company has a standard fixed cost of $10 per unit using a normal
capacity of 11,000 units. An unfavorable volume variance of $12,000
resulted. What was the volume produced?
a. 9,800
b. 11,000
c. 12,200
d. Cannot be determined without further information.
a 39. Gamma Corporation has total budgeted fixed costs of $150,000. Actual
production was 8,000 units; normal capacity is 7,500 units. What was
the volume variance?
a. $10,000 favorable
b. $15,000 favorable
c. $15,000 unfavorable
d. $10,000 unfavorable
b 40. Eastern Co. has total budgeted fixed costs of $150,000. Actual
production of 39,000 units resulted in a $6,000 favorable volume
variance. What normal capacity was used to determine the fixed overhead
rate?
a. 33,000
b. 37,500
c. 40,560
d. Cannot be determined without further information.
a 41. Western Company has a standard fixed cost of $8 per unit. At an actual
production of 8,000 units a favorable volume variance of $12,000
resulted. What were total budgeted fixed costs?
a. $52,000
b. $64,000
c. $76,000
d. Cannot be determined without further information.
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d 42. Monona Corporation has total budgeted fixed costs of $64,000. Actual
production was 15,000 units; normal capacity is 16,000 units. What was
the volume variance?
a. $4,000 favorable
b. $4,267 favorable
c. $4,267 unfavorable
d. $4,000 unfavorable
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b 47. Madison Industries manufactures a single product using standard
costing. Variable production costs are $26 and fixed production costs
are $250,000. Madison uses a normal activity of 12,500 units to set its
standard costs. Madison began the year with 1,000 units in inventory,
produced 11,000 units, and sold 11,500 units. The standard cost of
goods sold under variable costing would be
a. $230,000.
b. $299,000.
c. $506,000.
d. $529,000.
c 48. Sigma Company has a standard fixed cost of $18 per unit using a normal
capacity of 9,000 units. A favorable volume variance of $18,000
resulted. What was the volume produced?
a. 8,000
b. 9,000
c. 10,000
d. Cannot be determined without further information.
c 49. Western Co. has total budgeted fixed costs of $72,000. Actual
production of 5,500 units resulted in a $6,000 unfavorable volume
variance. What normal capacity was used to determine the fixed overhead
rate?
a. 5,000
b. 5,500
c. 6,000
d. Cannot be determined without further information.
True-False
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T 5. Proponents of variable costing for external reporting argue that while
fixed production costs benefit production as a whole, they do not
benefit any particular unit of product.
Problems
Assume standard absorption costing using normal capacity as the basis for
computing the standard fixed cost per unit. Compute
e. Ending inventory.
f. Volume variance.
g. Income.
187
SOLUTION:
SOLUTION:
188
3. Maiden Rock Company sells a single product for $25. It had no beginning
inventories. Operating data follow.
SOLUTION:
4. Genco Inc. makes a single product that sells for $50. The standard
variable manufacturing cost is $32.50 and the standard fixed manufacturing
cost is $7.50, based on producing 20,000 units. During the year Genco
produced 22,000 units and sold 21,000 units. Actual fixed manufacturing
costs were $157,000; actual variable manufacturing costs were $735,000.
Selling and administrative expenses, all fixed, were $75,000. There were
no beginning inventories.
SOLUTION:
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b. Sales $1,050,000
Variable Costs (21,000 x $32.50) $682,500
Variable Spending Variance 20,000 Un
Adjusted Variable Cost of Goods Sold 702,500
Contribution Margin $347,500
Fixed Costs:
Manufacturing $157,000
Selling & Administrative 75,000 232,000
Net Income $115,500
There were no variable cost variances for the year. Fixed costs incurred
were equal to the budgeted amount. There were no beginning inventories and
no selling or administrative expenses.
a. Compute the absorption costing income if fixed costs per unit are
determined using normal capacity.
b. Compute the absorption costing income if fixed costs per unit are
determined using practical capacity.
c. Compute the absorption costing income if fixed costs per unit are
determined using budgeted production.
SOLUTION:
190
6. Cumberland Company sells a single product for $30. It had no beginning
inventories. Operating data follow.
Assume standard absorption costing using normal capacity as the basis for
computing the standard fixed cost per unit. Compute
e. Ending inventory.
f. Volume variance.
g. Income.
SOLUTION:
191
7. Acme Company sells a single product for $30. It had no beginning
inventories. Operating data follow.
SOLUTION:
SOLUTION:
192
9. Bach Inc. makes a single product that sells for $40. The standard variable
manufacturing cost is $22 and the standard fixed manufacturing cost is $8,
based on producing 30,000 units. During the year Bach produced 28,000
units and sold 26,000 units. Actual fixed manufacturing costs were
$235,000; actual variable manufacturing costs were $595,000. Selling and
administrative expenses were $95,000. There were no beginning inventories.
SOLUTION:
b. Sales $1,040,000
Variable Costs (26,000 x $22) $572,000
Variable Spending Variance (21,000) F
Adjusted Variable Cost of Goods Sold 551,000
Contribution Margin $489,000
Fixed Costs:
Manufacturing 235,000
Selling & Administrative 95,000 330,000
Net Income $159,000
There were no variable cost variances for the year. Fixed costs incurred
were equal to the budgeted amount. There were no beginning inventories and
no selling or administrative expenses.
a. Compute the absorption costing income if fixed costs per unit are
determined using normal capacity.
b. Compute the absorption costing income if fixed costs per unit are
determined using practical capacity.
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c. Compute the absorption costing income if fixed costs per unit are
determined using budgeted production.
SOLUTION:
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