The change in period-to-period operating income when using variable costing can be explained by the change in the

1.   To apply direct costing method it is necessary that you know

A.  Standard production rate and times of production elements

B.  Contribution margin and break even point in production

C.  Variable and fixed cost related to production

D.  Controllable and uncontrollable cost of production

2.   The following statements about the adoption of variable costing are true, except:

A.  All fixed manufacturing costs are recognized as period costs.

B.  A direct cost may not become a product cost.

C.  It is an acceptable method for general reporting purposes.

D.  An indirect cost may be assigned as part of product cost.

3.   The change in period-to-period operating income when using variable costing can be explained by the change in the

A. Unit sales level multiplied by the unit sales price.

B. Finished goods inventory level multiplied by the unit sales price.

C. Unit sales level multiplied by a constant unit contribution margin.

D. Finished goods inventory level multiplied by a constant unit contribution margin.

4.   Which of the following is NOT an advantage of using variable costing for internal reporting purposes?

A. Fixed costs are reported at incurred values, not absorbed values, thus improving control over those costs.

B. Profits are directly influenced by changes in sales volume.

C. The impact of fixed costs on profits is emphasized.

D. Total costs may be overlooked when evaluating profits.

5.   Cay Co.’s 1995 fixed manufacturing overhead costs totaled $100,000, and variable selling costs totaled $80,000.  Under variable costing, how should those costs be classified?

	A.	B.	C.	D.
Period Costs	$0	$  80,000	$100,000	$180,000
Product Costs	$180,000	$100,000	$  80,000	$0

6.   A cost that is included as part of product costs under both absorption costing and direct costing is:

A.  managerial staff costs                               D.  taxes on factory building

B.  insurance                                                  E.   variable materials handling labor

C.  variable marketing expenses.

7.   Under variable costing,

A.  all product costs are variable.                   C.  all product costs are fixed

B.  all period costs are variable.                     D.  product costs are both fixed and variable.

8.   Which of the following is not associated with absorption costing?

A.  functional format  B.  gross margin         C.  Period costs          D.                              contribution margin

9.   Calculating income under variable costing does NOT require knowing

A. unit sales.                                                  C. selling price.

B. unit variable manufacturing costs.           D. unit production.

Accounting for the beginner is given below:

10. A criticism of variable costing for managerial accounting purposes is that it

A. is not acceptable for product line segmented reporting.

B. does not reflect cost-volume-profit relationships.

C. overstates inventories.

D. might encourage managers to emphasize the short term at the expense of the long term.