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“43. When production exceeds sales, net income reported under variable costing generally will be a. greater than net income reported under absorption costing. b. less than net income reported under absorption costing c. equal to net income reported under absorption costing. d. higher or lower because no generalization can be made.”
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Read more“42. Which of the following are considered to be a product cost under absorption costing? I. Variable manufacturing overhead. II. Fixed manufacturing overhead. III. Selling and administrative expenses. a. I, II, and III. b. I and III. c. I and II. d. I.”
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Read more41. Advocates of variable costing argue that a. fixed production costs should be added to inventory because such costs have future service potential and therefore are inventoriable as an asset. b. fixed production costs should be capitalized as an asset and amortized over future periods when benefits from such costs are expected to be received. c. fixed production costs should be charged to the period incurred unless sales do not equal production in which case any difference should be capitalized as an asset and amortized over future periods. d. fixed production costs should be charged to the period incurred in all cases since such costs cannot be avoided in the future.
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Read more“40. The following information pertains to Clove Co. for the year ending December 31, 19×2: Budgeted sales $1,000,000 Breakeven sales 700,000 Budgeted contribution margin 600,000 Clove’s margin of safety is a. $300,000 b. $400,000 c. $500,000 d. $800,000”,”1Margin of Safety = budgeted sales – breakeven sales = 1,000,000 – 700,000 = $300
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Read more“39. The Clyde Company’s variable costs are 35% of sales. Clyde Company is contemplating an advertising campaign that will cost $25,000. If sales are expected to increase $75,000, the company’s net income will increase by: a. $26,250 b. $23,750 c. $1,250 d. $65,000”,”2Sales 100% – Variable expenses 35%= Contribution Margin 65% Contribution margin is 65%Profit from new sales (75,000 x .65) = $48,750- Cost of Advertising (25,000) Increase in net income 23
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Read more“38. Carlton Company sells a single product at a selling price of $40 per unit. Variable costs are $22 per unit and fixed costs are $82,800. Carlton’s break- even point is: a. $184,000 b. 3,764 units c. $150,545 d. 2,070 units”,”1Sales = Variable expenses + Fixed expenses + Profits40Q = 22Q + 82,800 + 018Q = 82,800Q = 4,600 Break-even in $ = 4,600 x 40 = $184,000ORBreak-even point = Fixed Costs = 82,800 = 4,600 units Selling – Variable Costs 18Break-even in $ = 4,600 x $40 = $184,000Answer 2:Break-even point= Fixed Costs = 82,800 = 184
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Read more37. Which of the following would be true of the contribution margin and variable costs of a capital intensive company as compared to a labor-intensive company? Contribution Margin Variable Costs a. Higher Higher b. Lower Higher c. Higher Lower d. Lower Lower
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Read more36. The degree of operating leverage a. increases as sales and profits rise. b. is lowest at the break-even point. c. is greatest at the break-even point. d. is constant across all levels of sales and profits.
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Read more35. The traditional income statement required for external reporting a. organizes costs by behavior rather than by function. b. organizes costs by function rather than by behavior. c. emphasizes the concept of contribution margin. d. is equally useful for internal as well as external decisions.
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