Variable and absorption costing

Multiple choice questions (MCQs) quiz

1. Which of the following costs is not included while computing unit product cost under variable costing?

2. The reports generated by the variable costing system of a company is mostly used by:

3. Variable costing is also known as:

4. Absorption costing is also known as:

5. The reports generated by absorption costing (also known as full costing) is used by:

6. A company manufactures 1,000 units of product X per year . The cost data is given below:

• Direct materials: $5 per unit
• Direct labor: $4 per unit
• Variable manufacturing overhead: $3 per unit
• Fixed manufacturing overhead: $6,000 per year

Based on the above information, the variable cost to manufacture one unit of product X is:

7. The reason of difference in net operating income under variable costing and absorption costing is:

8. When inventory increases, the net operating income under absorption costing is always:

9. When inventory decreases, the net operating income under absorption costing is always:

10. When inventory increases, the fixed manufacturing overhead is deferred in inventory under:

11. Under absorption costing, when inventory decreases, the fixed manufacturing overhead is:

12. A variable costing income statement is helpful in performing cost, volume, and profit (CVP) analysis. It is therefore also known as:

13. Consider the following information:

• Number of units produced: 2,000 units
• Direct materials cost: $8 per unit
• Direct labor cost: $12 per unit
• Variable manufacturing overhead: $6 per unit
• Fixed manufacturing overhead: $8,000 per unit
• Variable selling and administrative cost: $2 per unit
• Fixed selling and administrative cost: $6,000

Based on the above information, what is the unit product cost under absorption costing system?

14. A business segment that is responsible for all of its revenues and expenses is known as:

15. Which of the following statements is true?

16. The inventories do not change under either absorption costing or variable costing when:

17. Under variable costing system, the unit product cost includes:

18. Under absorption costing, the unit product cost includes:

19. Consider the following information:

• Net operating income under variable costing: $25,000
• Increase in inventory during the period: 2,000 units
• Fixed manufacturing overhead: $50,000
• Number of units produced during the period: 10,000 units

Based on the above information, the net operating income under absorption costing is:

20. Consider the following information:

• Net operating income under variable costing: $50,000
• Decrease in inventory during the period: 5,000 units
• Fixed manufacturing overhead: $100,000
• Number of units produced during the period: 25,000 units

Based on the above information, the net operating income under absorption costing is:

21. Consider the following inventories and sales figures:

• Opening inventory: 25,000 units
• Closing inventory: 10,000 units
• Sales: 150,000 units

Based on the above information, the number of units produced during the period is:

22. Consider the following production and inventories figures:

• Units produced: 50,000 units
• units in opening inventory: 5,000 units
• Units in closing inventory: 10,000 units

Based in the above information, the number of units sold during the period is:

23. Consider the following information:

• Units produced and sold: 1,000 units
• Direct materials cost: $5 per unit
• Direct labor cost: $4 per units
• Variable manufacturing overhead cost: $3 per unit
• Fixed manufacturing overhead cost: $4,000

Based on the above information, the variable cost of goods sold is:

24. If sales revenue is $35,000, fixed cost is $5,000, and net operating income is $10,000, what is the contribution margin?

25. If contribution margin is $5,000, Variable cost is $4,000, and net operating income is $2,000, what is the fixed cost?

26. If sales revenue is $5,000, fixed cost is $1,000, and net operating income is $2,000, what is the variable cost?