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Clemson ACCT 2020 - Acct 2020 - Exam 2 Study Guide

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1) A reason why absorption costing income statements are sometimes difficult to interpret is that: they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.2) Which of the following costs at a manufacturing company would be treated asa product cost under variable costing? direct material cost3) Generally speaking, net operating income under variable and absorption costing will: be equal only when production and sales are equal4) Which of the following is true of a company that uses absorption costing? Unitproduct costs can change as a result of changes in the number of units manufactured.5) How would the following costs be classified (product or period) under variablecosting at a retail clothing store? Cost of purchasing clothing = product ; sales commission = period6) When unit sales are constant, but the number of units produced fluctuates and everything else remains the same, net operating income under variable costing will: remain constant.7) The costing method that treats all fixed costs as period costs is: variable costing.8) When sales exceed production and the company uses the LIFO inventory flowassumption, the net operating income reported under variable costing generally will be: greater than net operating income reported under absorption costing.9) Which of the following will usually be found on an income statement preparedusing absorption costing? Contribution margin = no ; gross margin = yes10) Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000Variable costs per unit: Direct materials $ 51Direct labor $ 12Variable manufacturing overhead $ 2Variable selling and administrative expense $ 5Fixed costs per year: Fixed manufacturing overhead $441,000Fixed selling and administrative expense $112,000 The absorption costing unit product cost is: 441,000/7000 = 63+51+12+2 = $12811) Homeyer Corporation has provided the following data for its two most recent years of operation: Selling price per unit $ 71Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 12Direct labor $ 6Variable manufacturing overhead $ 3Fixed manufacturing overhead per year $264,000Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 4Fixed selling and administrative expense per year $ 74,000 Year 1 Year 2Units in beginning inventory 0 3,000Units produced during the year 11,000 12,000Units sold during the year 8,000 14,000Units in ending inventory 3,000 1,000 The net operating income (loss) under absorption costing in Year 1 is closest to: Year 1Direct materials $ 12Direct labor 6Variable manufacturing overhead 3Fixed manufacturing overhead($264,000 ÷ 11,000 units produced) 24Absorption costing unit product cost $ 45 Absorption costing income statement: Year 1Sales [(8,000 units sold × $71 per unit)] $568,000Cost of goods sold [(8,000 units sold × $45 per unit)] 360,000Gross margin 208,000Selling and administrative expenses[((8,000 units sold × $4 per unit) + $74,000)] 106,000Net operating income (loss) $102,00012) Rhea Corporation has provided the following data for its two most recent years of operation: Selling price per unit $ 67Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 10Direct labor $ 5Variable manufacturing overhead $ 3Fixed manufacturing overhead per year $252,000Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 4Fixed selling and administrative expense per year $ 65,000 Year 1 Year 2Units in beginning inventory 0 1,000Units produced during the year 9,000 7,000Units sold during the year 8,000 7,000Units in ending inventory 1,000 1,000 The net operating income (loss) under absorption costing in Year 2 is closest to: $6000Direct materials $ 10 $ 10Direct labor 5 5Variable manufacturing overhead 3 3Fixed manufacturing overhead($252,000 ÷ 9,000 units produced; $252,000 ÷ 7,000 units produced) 28 36Absorption costing unit product cost $ 46 $ 54 Absorption costing income statement: Year 2Sales [(8,000 units sold × $67 per unit); (7,000 units sold × $67 per unit)] $469,000Cost of goods sold [(8,000 units sold × $46 per unit); 370,000((1,000 units sold × $46 per unit) + (6,000 units sold × $54 per unit))= $46,000 + $324,000)]Gross margin 99,000Selling and administrative expenses[((8,000 units sold × $4 per unit) + $65,000);((7,000 units sold × $4 per unit) + $65,000)] 93,000Net operating income (loss) $ 6,00013) Mccrone Corporation has provided the following data for its two most recent years of operation: Selling price per unit $ 59Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 11Direct labor $ 6Variable manufacturing overhead $ 4Fixed manufacturing overhead per year $88,000Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 4Fixed selling and administrative expense per year $80,000 Year 1 Year 2Units in beginning inventory 0 1,000Units produced during the year 11,000 8,000Units sold during the year 10,000 5,000Units in ending inventory 1,000 4,000 The net operating income (loss) under variable costing in Year 1 is closest to:$172,000 Variable costing income statement: Year 1Sales [(10,000 units sold × $59 per unit)] $590,000Variable expenses: Variable cost of goods sold[(10,000 units sold × $21 per unit)] 210,000 Variable selling and administrative expense[(10,000 units sold × $4 per unit)] 40,000 250,000Contribution margin 340,000Fixed expenses: Fixed manufacturing overhead 88,000 Fixed selling and administrative expenses 80,000 168,000Net operating income $172,000Direct materials $ 11Direct labor 6Variable manufacturing overhead 4Variable costing unit product cost $ 2113) Badoni Corporation has provided the following data for its two most recent years of operation: Selling price per unit $ 85Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials $ 10Direct labor $ 6Variable manufacturing overhead $ 4Fixed manufacturing overhead per year $96,000Selling and administrative expenses: Variable selling and administrative expense per unit sold $ 5Fixed selling and administrative expense per year $77,000 Year 1 Year 2Units in beginning inventory 0


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