ACCT201B Practice Exam Chapter 6

Name___________________________________

1. Under variable costing, product costs consist of direct materials, direct labor, and variable
manufacturing overhead.
A. True
B. False
ID: Ma07brew 6-1

2. The costs assigned to units in inventory are typically lower under variable costing than under
absorption costing.
A. True
B. False
ID: Ma07brew 6-5

3. Sharron Inc., which produces a single product, has provided the following data for its most recent
month of operations:

Number of units produced 3,000

Variable costs per unit:
Direct materials $91
Direct labor $13
Variable manufacturing overhead $7
Variable selling and administrative expense $6
Fixed costs:
Fixed manufacturing overhead $237,000
Fixed selling and administrative expense $165,000

There were no beginning or ending inventories. The variable costing unit product cost was:
A. $111 per unit
B. $117 per unit
C. $190 per unit
D. $110 per unit
ID: Ma07brew 6-45

1
4. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:

Units in beginning inventory 0

Units produced 7,300
Units sold 7,200
Units in ending inventory 100

Variable costs per unit:

Direct materials $29
Direct labor $49
Variable manufacturing overhead $5
Variable selling and administrative $4
Fixed costs:
Fixed manufacturing overhead $94,900
Fixed selling and administrative $79,200

What is the absorption costing unit product cost for the month?
A. $96 per unit
B. $87 per unit
C. $83 per unit
D. $100 per unit
ID: Ma07brew 6-46

5. Delvin Corporation, which has only one product, has provided the following data concerning its
most recent month of operations:

Selling price $120

Units in beginning inventory 0

Units produced 1,800
Units sold 1,500

2
Units in ending inventory 300

Variable costs per unit:

Direct materials $40
Direct labor $42
Variable manufacturing overhead $2
Variable selling and administrative $9
Fixed costs:
Fixed manufacturing overhead $7,200
Fixed selling and administrative $28,500

What is the total period cost for the month under variable costing?
A. $35,700
B. $42,000
C. $49,200
D. $7,200
ID: Ma07brew 6-86

3
6. Delvin Corporation, which has only one product, has provided the following data concerning its
most recent month of operations:

Selling price $120

Units in beginning inventory 0

Units produced 1,800
Units sold 1,500
Units in ending inventory 300

Variable costs per unit:

Direct materials $40
Direct labor $42
Variable manufacturing overhead $2
Variable selling and administrative $9
Fixed costs:
Fixed manufacturing overhead $7,200
Fixed selling and administrative $28,500

What is the total period cost for the month under the absorption costing?
A. $42,000
B. $7,200
C. $28,500
D. $49,200
ID: Ma07brew 6-87

7. Under absorption costing, fixed manufacturing overhead costs:

A. are always treated as period costs.
B. are deferred in inventory when production exceeds sales.
C. are released from inventory when production exceeds sales.
D. are ignored.
ID: Ma07brew 6-32

4
8. Jarvix Corporation, which has only one product, has provided the following data concerning its mos
recent month of operations:

Selling price $111

Units in beginning inventory 400

Units produced 8,800
Units sold 8,900
Units in ending inventory 300

Variable costs per unit:

Direct materials $34
Direct labor $37
Variable manufacturing overhead $3
Variable selling and administrative $9

Fixed costs:
Fixed manufacturing overhead $61,600
Fixed selling and administrative $169,100

The company produces the same number of units every month, although the sales in units vary
from month to month. The company's variable costs per unit and total fixed costs have been
constant from month to month.

What is the net operating income for the month under variable costing?
A. $2,100
B. $18,500
C. $25,900
D. $17,800
ID: Ma07brew 6-100

9. Jarvix Corporation, which has only one product, has provided the following data concerning its mos
recent month of operations:

Selling price $111

5
Units in beginning inventory 400
Units produced 8,800
Units sold 8,900
Units in ending inventory 300

Variable costs per unit:

Direct materials $34
Direct labor $37
Variable manufacturing overhead $3
Variable selling and administrative $9

Fixed costs:
Fixed manufacturing overhead $61,600
Fixed selling and administrative $169,100

The company produces the same number of units every month, although the sales in units vary
from month to month. The company's variable costs per unit and total fixed costs have been
constant from month to month.

What is the net operating income for the month under absorption costing?
A. $17,800
B. $2,100
C. $18,500
D. $25,900
ID: Ma07brew 6-101

6
10. Yankee Corporation manufactures a single product. The company has the following cost structure:

Variable costs per unit:

Production $4
Selling and administrative $1
Fixed costs in total:
Production $12,000
Selling and administrative $8,000

Last year, 4,000 units were produced and 3,500 units were sold. There were no beginning
inventories.

Under absorption costing, the cost of goods sold for the year would be:
A. $17,500
B. $24,500
C. $14,000
D. $28,000
ID: Ma07brew 6-132

7
11. Yankee Corporation manufactures a single product. The company has the following cost structure:

Variable costs per unit:

Production $4
Selling and administrative $1
Fixed costs in total:
Production $12,000
Selling and administrative $8,000

Last year, 4,000 units were produced and 3,500 units were sold. There were no beginning
inventories.

The carrying value on the balance sheet of the ending finished goods inventory under variable
costing would be:
A. the same as under absorption costing
B. $2,000 less than under absorption costing
C. $2,000 higher than under absorption costing
D. $1,500 less than under absorption costing
ID: Ma07brew 6-131

12. Cutterski Corporation manufactures a propeller. Shown below is Cutterski's cost structure:

Total fixed cost

Variable cost per propeller
for the year
Manufacturing cost $114 $810,000
Selling and administrative expense $20 $243,000

In its first year of operations, Cutterski produced 60,000 propellers but only sold 54,000.
Which costing method (variable or absorption) will generate a higher net operating income in
Cutterski's first year of operations and by how much?
A. absorption by $81,000
B. absorption by $108,000
C. variable by $81,000
D. variable by $108,000
ID: Ma07brew 6-135

8
13. Net operating income is affected by the number of units produced when absorption costing is used.
A. True
B. False
ID: Ma07brew 6-13

14. When the number of units in work in process and finished goods inventories decrease, absorption
costing net operating income will typically be greater than variable costing net operating income.
A. True
B. False
ID: Ma07brew 6-15

15. George Corporation has no beginning inventory and manufactures a single product. If the number
of units produced exceeds the number of units sold, then net operating income under the
absorption method for the year will:
A. be equal to the net operating income under variable costing less total fixed manufacturing
costs.
B. be greater than the net operating income under variable costing.
C. be equal to the net operating income under variable costing plus total fixed manufacturing
costs.
D. be equal to the net operating income under variable costing.
ID: Ma07brew 6-37

16. Yuvil Corporation produces a single product. At the end of the company's first year of operations,
1,000 units of inventory remained on hand. Its variable manufacturing overhead cost is $45 per
unit and its fixed manufacturing overhead cost is $10 per unit. Yuvil's absorption costing net
operating income would be higher than its variable costing net operating income by:
A. $45,000
B. $10,000
C. $0
D. $35,000
ID: Ma07brew 6-61

17. Brummitt Corporation has two divisions: the BAJ Division and the CBB Division. The
corporation's net operating income is $10,700. The BAJ Division's divisional segment margin is
$76,100 and the CBB Division's divisional segment margin is $42,300. What is the amount of the
common fixed expense not traceable to the individual divisions?
A. $107,700
B. $53,000
C. $118,400
D. $86,800
ID: Ma07brew 6-68

9
18. Sorto Corporation has two divisions: the East Division and the West Division. The corporation's
net operating income is $93,200. The East Division's divisional segment margin is $223,200 and
the West Division's divisional segment margin is $15,900. What is the amount of the common
fixed expense not traceable to the individual divisions?
A. $109,100
B. $316,400
C. $145,900
D. $239,100
ID: Ma07brew 6-72

19. Common fixed expenses should be allocated to business segments when performing break-even
calculations and making decisions.
A. True
B. False
ID: Ma07brew 6-25

20. Bode Corporation has two divisions: East and West. Data from the most recent month appear below

East West
Sales $324,000 $149,000
Variable expenses $93,960 $34,270
Traceable fixed expenses $156,000 $90,000

The company's common fixed expenses total $47,300. If the company operates at exactly the
break-even sales of the East Division and West Division, what would be the company's overall net
operating income?
A. ($293,300)
B. ($47,300)
C. $0
D. $51,470
ID: Ma07brew 6-85

10