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| 1 | Selling and administrative expenses are considered to be
(Learning Objective 1 Ch 6) |
 | A) | a product cost under variable costing. |
| B) | a product cost under absorption costing. |
| C) | part of fixed manufacturing overhead under variable costing. |
| D) | a period cost under variable costing. |
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| 2 | During the month of April, Vane Co. produced and sold 10,000 units of a product. Manufacturing and selling costs incurred during April were as follows:
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Assume that direct labour is a variable cost. The unit product cost under variable costing was
(Learning Objective 1 Ch 6) |
| A) | £49 |
| B) | £50 |
| C) | £51 |
| D) | £52 |
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| 3 | The costs assigned to units in stock are typically lower under absorption costing than under variable costing
(Learning Objective 1 Ch 6) |
| A) | True |
| B) | False |
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| 4 | The next 3 questions are based on the following information:
Alpha company produces a single product, with the following costs:
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Variable cost per unit is:
(Learning Objective 1 Ch 6) |
| A) | £3 |
| B) | £7 |
| C) | £9 |
| D) | £11 |
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| 5 | If Alpha has no opening stock at the beginning of the period, and sell 2,000 units during the period, for £15 each, what is their profit, using absorption costing?
(Learning Objective 2 Ch 6) |
| A) | -£2,500 |
| B) | £2,500 |
| C) | £7,000 |
| D) | £8,000 |
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| 6 | What is the profit using variable costing?
(Learning Objective 3 Ch 6) |
| A) | -£2,500 |
| B) | £2,500 |
| C) | £7,000 |
| D) | £8,000 |
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| 7 | When inventory levels increase over an accounting period:
(Learning Objective 4 Ch 6) |
| A) | Absorption costing will report a higher profit than variable costing |
| B) | Variable costing will report a higher profit than absorption costing |
| C) | The reported profit will be the same for both methods |
| D) | The inventory valuation will be the higher for variable costing than absorption costing |
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| 8 | Profits move in the same direction as sales when variable costing is used if selling prices, the sales mix, and the cost structure remain the same.
(Learning Objective 4 Ch 6) |
| A) | True |
| B) | False |
|
| 9 | Advantages of using variable costing include (more than one may be right)
(Learning Objective 5 Ch 6) |
| A) | Variable costing complies with generally accepted accounting principles |
| B) | Variable costing ties in with cost control methods such as standard costs and flexible budgets |
| C) | With variable costing, the profit for a period is not affected by changes in stock. |
| D) | It is not necessary to keep two sets of records if variable costing is used. |
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| 10 | A company using Just-in-Time (JIT) methods likely would show approximately the same net operating income under both absorption and variable costing because:
(Learning Objective 6 Ch 6) |
| A) | ending stock would be valued in the same manner for both methods under JIT. |
| B) | production is geared to sales under JIT and thus there would be little or no ending stock. |
| C) | under JIT fixed manufacturing overhead costs are charged to the period incurred rather than to the product produced. |
| D) | there is no distinction made under JIT between fixed and variable costs. |