Using absorption costing, which of the following manufacturing
costs are assigned to products?
A) Direct materials and direct labor.
B) Direct labor and variable manufacturing overhead.
C) Fixed manufacturing overhead, direct materials, and direct
labor.
D) Variable manufacturing overhead, direct materials, and direct
labor.
E) Variable manufacturing overhead, direct materials, direct
labor, and fixed MOH
2. Which of
the following is not included in the product cost under variable
costing?
A) Direct materials.
B) Fixed manufacturing overhead.
C) Direct labor.
D) Variable manufacturing overhead.
E) All variable manufacturing costs.
3. Which of
the following statements is true?
A) Variable costing treats fixed overhead as a period cost.
B) Absorption costing treats fixed overhead as a period
cost.
C) Absorption costing treats fixed overhead as an expense in the
period it is incurred.
D) Variable costing excludes all overhead from product
costs.
E) Managers can manipulate earnings more easily under variable
costing by varying the production level.
4. Which of
the following statements is true regarding variable costing?
A) It is a traditional costing approach.
B) Only manufacturing costs that change in total with changes in
production level are included in product costs.
C) It is not permitted to be used for managerial reporting.
D) It treats overhead in the same manner as absorption
costing.
E) It makes it easier to manipulate earnings with changes in
production levels.
5. Which of
the following statements is true?
A) Under variable costing, direct materials and direct labor are
expensed as period expenses
B) Under variable costing, fixed manufacturing overhead is
expensed as period expenses.
C) Fixed manufacturing overhead costs are treated the same under
both absorption costing and variable costing.
D) Reported income under absorption costing is not affected by
production level changes.
E) Under absorption costing, fixed manufacturing overhead is
expensed as period expenses
6. Mentor Corp. has provided the following
information for the current year:
| Units produced | 3,500 units |
| Sale price | $200 per unit |
| Direct materials | $70 per unit |
| Direct labor | $55 per unit |
| Variable manufacturing overhead | $20 per unit |
| Fixed manufacturing overhead | $350,000 per year |
| Variable selling and administrative costs | $30 per unit |
| Fixed selling and administrative costs | $150,000 per year |
Calculate the unit product cost using absorption costing.
A) $245
B) $275
C) $55
D) $145
7. Mentor
Corp. has provided the following information for the current
year:
| Units produced | 3,500 units |
| Sale price | $200 per unit |
| Direct materials | $70 per unit |
| Direct labor | $55 per unit |
| Variable manufacturing overhead | $20 per unit |
| Fixed manufacturing overhead | $350,000 per year |
| Variable selling and administrative costs | $30 per unit |
| Fixed selling and administrative costs | $150,000 per year |
Calculate the unit product cost using variable costing.
A) $245
B) $275
C) $55
D) $145
8. Under
absorption costing, a company had the following unit costs when
8,000 units were
produced.
| Direct labor | $ | 8.50 | per unit |
| Direct material | $ | 9.00 | per unit |
| Variable overhead | $ | 6.75 | per unit |
| Fixed overhead ($60,000/8,000 units) | $ | 7.50 | per unit |
| Total production cost | $ | 31.75 | per unit |
Compute the total production cost per unit under variable
costing if 25,000 units had been produced.
A) $31.75
B) $27.25
C) $26.25
D) $24.25
E) $17.50
9. When evaluating a special order, management
should:
A) Only accept the order if the incremental revenue exceeds all
product costs.
B) Only accept the order if the incremental revenue exceeds
fixed product costs.
C) Only accept the order if the incremental revenue exceeds
total variable product costs.
D) Only accept the order if the incremental revenue exceeds full
absorption product costs.
E) Only accept the order if the incremental revenue exceeds
regular sales revenue.
10. Which of the
following best describes costs assigned to the product under the
absorption costing method?
Direct labor (DL)
Direct materials (DM)
Variable selling and
administrative (VSA)
Variable manufacturing overhead
(VOH)
Fixed selling and administrative
(FSA)
Fixed manufacturing overhead
(FOH)
A) DL, DM, VSA, and VOH.
B) DL, DM, and VOH.
C) DL, DM, VOH, and FOH.
D) DL and DM.
E) DL, DM, FSA, and FOH.
11. Which of the following best describes costs assigned to the
product under the variable costing method?
Direct labor (DL)
Direct materials (DM)
Variable selling and
administrative (VSA)
Variable manufacturing overhead
(VOH)
Fixed selling and administrative
(FSA)
Fixed manufacturing overhead
(FOH)
A) DL, DM, VSA, and VOH.
B) DL, DM, and VOH.
C) DL, DM, VOH, and FOH.
D) DL and DM.
E) DL, DM, FSA, and FOH.
Answer
1. Answer: E) Variable manufacturing
overhead, direct materials, direct labor, and fixed MOH.
Under absorption costing, along with
the direct materials, direct labor, and variable manufacturing
overhead, the fixed manufacturing overhead is also considered a
product cost and is assigned to products.
2. Answer: B) Fixed manufacturing
overhead.
Under variable costing, the fixed
manufacturing overhead is not included in the product cost but is
considered as a period cost and charged to expense in the period
incurred.
3. Answer: A) Variable costing
treats fixed overhead as a period cost.
Under variable costing the fixed
overhead is treated as a period cost and charged to expense when
incurred. Hence, statement A is true.
Absorption costing treats fixed
overhead as a product cost and not as a period cost. Hence,
statement B is false.
The fixed overhead is not treated as
an expense in the period it is incurred but is treated as a product
cost and assigned to products. Hence, statement C is false.
Variable costing includes variable
manufacturing overhead in the product cost and only excludes the
fixed manufacturing overhead from its product cost. Hence,
statement D is false.
Under absorption costing the level
of production determines the product cost since higher the
production lower would be the fixed manufacturing overhead cost per
unit. Under variable costing the fixed manufacturing overhead is
charged to expense when incurred and hence is not dependent on the
production level. Earnings can thus be manipulated more easily by
managers under absorption costing by varying the production level.
Hence, statement E is false.
4. Answer: B) Only manufacturing
costs that change in total with changes in production level are
included in product costs.
Direct materials, direct labor, and
variable manufacturing overheads which are included in product cost
under variable costing are all variable costs which are constant
per unit however change in total with a change in the level of
production. Hence, statement B is true.
Absorption costing is a traditional
costing method hence, statement A is false.
Variable costing may be used for
managerial reporting however it is not permitted to be used for
reporting under GAAP. Hence, statement C is false.
Variable costing treats variable
manufacturing overhead as a product cost and fixed manufacturing
overhead as a period cost unlike absorption costing which treats
both variable and fixed manufacturing overheads as product costs.
Hence, treatment of overheads is not the same under variable and
absorption costing due to which statement E is false.
Under absorption costing the level
of production determines the product cost since higher the
production lower would be the fixed manufacturing overhead cost per
unit. Under variable costing the fixed manufacturing overhead is
charged to expense when incurred and hence is not dependent on the
production level. Thus, earnings can be manipulated more easily
under absorption costing by varying the production level and not
under variable costing. Hence, statement E is false.
Per Chegg guidelines the first 4
MCQs have been answered. Please post the remaining separately.
Thank you.
