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Exam 21: Variable Costing for Management Analysis

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Question 61

True/False

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If the ability to sell and the amount of production facilities devoted to each of two products are equal, it is profitable to increase the sales of that product with the highest contribution margin.

A) True
B) False

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Question 62

Multiple Choice

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Jake Entertainment Corporation has three segments with revenue, operating income, and depreciation and amortization information (in millions) as follows: The EBITDA for the Film segment is

A) $975 million
B) $2,025 million
C) $2,975 million
D) $4,475 million

E) A) and B)
F) None of the above

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Question 63

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A business operated at 100% of capacity during its first month, with the following results: ​ -The amount of operating income that would be reported on the variable costing income statement is

A business operated at 100% of capacity during its first month and incurred the following costs: If 500 units remain unsold at the end of the month, the amount of inventory that would be reported on the variable costing balance sheet is

Fixed costs are $50 per unit, and variable costs are $125 per unit. Production was 130,000 units, while sales were 125,000 units. Determine (a) whether variable costing operating income is less than or greater than absorption costing operating income and (b) the difference in variable costing and absorption costing operating income.

The taxes on the factory superintendent's salary would be included as part of the cost of products manufactured under the variable costing concept.

Changes in the quantity of finished goods inventory, caused by differences in the levels of sales and production, directly affect the amount of operating income reported under absorption costing.

In determining cost of goods sold, two alternate costing concepts can be used: absorption costing and variable costing.

The contribution margin ratio is computed as contribution margin divided by sales.

In evaluating the performance of salespersons, the salesperson with the highest level of sales dollars should be evaluated as the best performer.

Under absorption costing, the cost of finished goods includes direct materials, direct labor, and all factory overhead.

For a period during which the quantity of product manufactured exceeds the quantity sold, operating income reported under absorption costing will be larger than operating income reported under variable costing.

Jake Entertainment Corporation has three segments with revenue, operating income, and depreciation and amortization information (in millions) as follows: The EBITDA as a percent of revenue for the Video Game segment is

Management will use both variable and absorption costing in all of the following activities except

Jake Entertainment Corporation has three segments with revenue, operating income, and depreciation and amortization information (in millions) as follows: The segment with the highest EBITDA as a percent of revenue is

Sales mix is generally defined as the relative distribution of sales among the various products sold.

Contribution margin reporting can be beneficial for analyzing which of the following?

For a period during which the quantity of product manufactured exceeds the quantity sold, operating income reported under absorption costing will be smaller than operating income reported under variable costing.

The level of inventory of a manufactured product has increased by 5,000 units during a period. The following data are also available: The effect on operating income if variable costing is used rather than absorption costing would be a

In the short run, the selling price of a product should normally not be less than the variable costs and expenses of making and selling it.