BUS 252 Accounting_Test_Bank_12- California Lutheran University

140. Under absorption costing, ending inventory on the balance sheet would be valued
at:



A. $10,00
0
B. $7,00
0
C. $9,00
0
D. $12,00
0

Units in ending inventory = Units in beginning inventory + Units produced - Units
sold
= 0 units + 6,000 units - 5,000 units = 1,000 units

Unit product cost under absorption costing:




Ending finished goods inventory = $9 per unit × 1,000 units = $9,000


AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit
product costs under each method.

,141. For the year in question, net operating income under variable costing will be:



A. higher than net operating income under absorption
costing.
B. lower than net operating income under absorption
costing.
C. the same as net operating income under absorption
costing.
D. The relation between absorption costing and variable costing net operating
income cannot be determined.

Because production exceeds sales, the net operating income for variable costing
will be lower than for absorption costing. This occurs because under absorption
costing, some of the fixed manufacturing overhead cost is deferred in ending
inventories.


AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit
product costs under each method.

During its first year of operations, Carlos Manufacturing Corporation incurred the
following costs to produce 8,000 units of its only product:




The company also incurred the following costs in selling 7,500 units of product
during its first year:




Assume that direct labor is a variable cost.

,142. Under absorption costing, what is the total cost that would be assigned to Carlos'
finished goods inventory at the end of the first year of operations?



A. $15,00
0
B. $42,12
5
C. $44,00
0
D. $47,12
5

Unit product cost under absorption costing:




Units in ending inventory = Units in beginning inventory + Units produced - Units
sold
= 0 units + 8,000 units - 7,500 units = 500 units

Value of ending finished goods inventory = $84.25 per unit × 500 units = $42,125


AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit
product costs under each method.
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain
why the two amounts differ.

, 143. Under variable costing, what is the total cost that would be assigned to Carlos'
finished goods inventory at the end of the first year of operations?



A. $15,00
0
B. $42,12
5
C. $44,00
0
D. $14,00
0

Unit product cost under variable costing:




Units in ending inventory = Units in beginning inventory + Units produced - Units
sold
= 0 units + 8,000 units - 7,500 units = 500 units

Value of ending finished goods inventory = $28.00 per unit × 500 units = $14,000


AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit
product costs under each method.
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain
why the two amounts differ.