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Variable and absorption costing Multiple choice questions (MCQs)
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ABOUT THIS QUIZ:
- Chapter: Variable and absorption costing
- Quiz Type: Multiple choice questions (MCQs)
- Number of MCQs: 26
- Total Points: 26
- Approximate Time Required: 15 – 20 minutes
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Question 1 of 26
1. Question
Which of the following costs is not included while computing unit product cost under variable costing?
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Question 2 of 26
2. Question
The reports generated by variable costing system of a company is mostly used by:
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Question 3 of 26
3. Question
Variable costing is also known as:
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Question 4 of 26
4. Question
Absorption costing is also known as:
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Question 5 of 26
5. Question
The reports generated by absorption costing (also known as full costing) is used by:
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Question 6 of 26
6. Question
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:
Correct
Awesome! Your answer is correct.
Computation:
Variable cost per unit = Direct materials per unit + Direct labor per unit + Variable manufacturing overhead per unit
= $5 + $4 + $3
= $12Fixed manufacturing overhead is not included while computing unit product cost under variable costing system
Incorrect
Your answer is incorrect. The correct answer is “$12” (option 4).
Computation:
Variable cost per unit = Direct materials per unit + Direct labor per unit + Variable manufacturing overhead per unit
= $5 + $4 + $3
= $12Fixed manufacturing overhead is not included while computing unit product cost under variable costing system.
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Question 7 of 26
7. Question
The reason of difference in net operating income under variable costing and absorption costing is:
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Question 8 of 26
8. Question
When inventory increases, the net operating income under absorption costing is:
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Question 9 of 26
9. Question
When inventory decreases, the net operating income under absorption costing is:
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Question 10 of 26
10. Question
When inventory increases, the fixed manufacturing overhead is deferred in inventory under:
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Question 11 of 26
11. Question
Under absorption costing, when inventory decreases the fixed manufacturing overhead is:
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Question 12 of 26
12. Question
A variable costing income statement is helpful in performing cost, volume, and profit (CVP) analysis. It is therefore also known as:
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Question 13 of 26
13. Question
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?
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Question 14 of 26
14. Question
A business segment that is responsible for all of its revenues and expenses is known as:
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Question 15 of 26
15. Question
Which of the following statements is true?
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Question 16 of 26
16. Question
The inventories do not change under either absorption costing or variable costing when:
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Question 17 of 26
17. Question
Under variable costing system, the unit product cost includes:
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Question 18 of 26
18. Question
Under absorption costing, the unit product cost includes:
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Question 19 of 26
19. Question
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:
Correct
Awesome! Your answer is correct.
Computation:
Net operating income under absorption costing = Net operating income under variable costing + Fixed manufacturing overhead deferred in inventory
= $25,000 + $10,000*
= $35,000*Fixed manufacturing overhead deferred in inventory = Increase in inventory × Fixed manufacturing overhead per unit
= 2,000 units × ($50,000/10,000 units)
= 2,000 units × $5
= $10,000When inventory increases, the fixed manufacturing overhead cost is deferred in inventory under absorption costing system which causes a higher net operating income under absorption costing than variable costing.
Incorrect
Your answer is incorrect. The correct answer is “$35,000” (option 3).
Computation:
Net operating income under absorption costing = Net operating income under variable costing + Fixed manufacturing overhead deferred in inventory
= $25,000 + $10,000*
= $35,000*Fixed manufacturing overhead deferred in inventory = Increase in inventory × Fixed manufacturing overhead per unit
= 2,000 units × ($50,000/10,000 units)
= 2,000 units × $5
= $10,000When inventory increases, the fixed manufacturing overhead cost is deferred in inventory under absorption costing system which causes a higher net operating income under absorption costing than variable costing.
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Question 20 of 26
20. Question
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:
Correct
Awesome! Your answer is correct.
Computation:
Net operating income under absorption costing = Net operating income under variable costing – Fixed manufacturing overhead released from inventory
= $50,000 – $20,000*
= $30,000*Fixed manufacturing overhead released from inventory = Decrease in inventory × Fixed manufacturing overhead per unit
= 5,000 units × ($100,000/25,000 units)
= 5,000 units × $4
= $20,000When inventory decreases, the fixed manufacturing overhead cost is released from inventory under absorption costing system which causes a lower net operating income under absorption costing than variable costing.
Incorrect
Your answer is incorrect. The correct answer is “$30,000” (option 4).
Computation:
Net operating income under absorption costing = Net operating income under variable costing + Fixed manufacturing overhead released from inventory
= $50,000 – $20,000*
= $30,000*Fixed manufacturing overhead released from inventory = Decrease in inventory × Fixed manufacturing overhead per unit
= 5,000 units × ($100,000/25,000 units)
= 5,000 units × $4
= $20,000When inventory decreases, the fixed manufacturing overhead cost is released from inventory under absorption costing system which causes a lower net operating income under absorption costing than variable costing.
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Question 21 of 26
21. Question
- 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:
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Question 22 of 26
22. Question
- 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:
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Question 23 of 26
23. Question
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:
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Question 24 of 26
24. Question
If sales revenue is $35,000, fixed cost is $5,000, and net operating income is $10,000, what is the contribution margin?
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Question 25 of 26
25. Question
If contribution margin is $5,000, Variable cost is $4,000, and net operating income is $2,000, what is the fixed cost?
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Question 26 of 26
26. Question
If sales revenue is $5,000, fixed cost is $1,000, and net operating income is $2,000, what is the variable cost?
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