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8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by: (150,000 + 75.000+ 25,000) x 25% a) True b) False 9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by: Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10% a) True b) False 10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS: a) True b) False

8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by: (150,000 + 75.000+ 25,000) x 25% a) True b) False 9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by: Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10% a) True b) False 10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS: a) True b) False

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter3: Cost Behavior And Cost Forecasting
Section: Chapter Questions
Problem 61P: Method of Least Squares, Predicting Cost for Different Time Periods from the One Used to Develop a...
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8. Under 75% sales assumption, using variable costing, the variable product cost balance can be calculated by:
(150,000 + 75.000+ 25,000) x 25%
a) True

b) False


9. Under 75% sales assumption, using variable costing, the contribution margin balance can be calculated by:
Less: (150,000 + 75.000+ 25,000) x 75% Less: 450,000 x 10%
a) True

b) False


10. Under Variable Costing, if a company produces more and sales less: The Net income is LESS, and the End Inventory is LESS:
a) True

b) False

XYZ Company anticipates the following costs during the first year of operations. The company is attempting to project profitability if 100% of production is sold, and if 75% of production is sold. Use the pick lists associated with the boxed areas to select amounts for each cost category in the absorption and variable costing income statements that follow. Correct selections will turn the boxed areas green. Afterwards, answer the questions at the bottom of the spreadsheet. Direct labor Direct materials Variable manufacturing overhead Fixed manufacturing overhead Variable selling, general, and administrative Fixed selling, general, and administrative Sales 7:05 Absorption v. variable costing.xlsx Assumption >>>> Less: SG&A Income Less: Cost of goods sold Gross profit Sales XYZ Company ABSORPTON COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 75% Sold Assumption >>>> Income Less: Variable product cost Variable manufacturing margin Less: Variable SG&A Contribution margin Less: Fixed expenses 450,000 262,500 187,500 XYZ Company VARIABLE COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 75% Sold 95,000 92,500 450,000 187,500 262,500 45,000 217,500 0 250,000 110,000 150,000 67,500 150,000 How much is ending inventory if 75% of the production is sold, and: XYZ uses absorption costing? >>>> XYZ uses variable costing? >>>> 75,000 25,000 100,000 10% of sales 50,000 100% Sold 600,000 350,000 140,000 100% Sold 600,000 250,000 350,000 60,000 290,000 150,000 140,000 Notice that income is the same under absorption and variable costing if all production is sold. This is not true when only 75% of production is sold because all of the manufacturing overhead is charged against income under variable costing, but not absorption costing. 87,500 62,500 Notice that the $25,000 difference between ending inventory amounts ($87,500 and $62,500) is equal to the difference in income ($92,500 v. $67,500). This occurs because $25,000 of fixed manufacturing overhead is assigned to inventory under absorption costing but charged against income under variable costing. 80 Done
Transcribed Image Text:XYZ Company anticipates the following costs during the first year of operations. The company is attempting to project profitability if 100% of production is sold, and if 75% of production is sold. Use the pick lists associated with the boxed areas to select amounts for each cost category in the absorption and variable costing income statements that follow. Correct selections will turn the boxed areas green. Afterwards, answer the questions at the bottom of the spreadsheet. Direct labor Direct materials Variable manufacturing overhead Fixed manufacturing overhead Variable selling, general, and administrative Fixed selling, general, and administrative Sales 7:05 Absorption v. variable costing.xlsx Assumption >>>> Less: SG&A Income Less: Cost of goods sold Gross profit Sales XYZ Company ABSORPTON COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 75% Sold Assumption >>>> Income Less: Variable product cost Variable manufacturing margin Less: Variable SG&A Contribution margin Less: Fixed expenses 450,000 262,500 187,500 XYZ Company VARIABLE COSTING INCOME STATEMENT For the Year Ending December 31, 20XX 75% Sold 95,000 92,500 450,000 187,500 262,500 45,000 217,500 0 250,000 110,000 150,000 67,500 150,000 How much is ending inventory if 75% of the production is sold, and: XYZ uses absorption costing? >>>> XYZ uses variable costing? >>>> 75,000 25,000 100,000 10% of sales 50,000 100% Sold 600,000 350,000 140,000 100% Sold 600,000 250,000 350,000 60,000 290,000 150,000 140,000 Notice that income is the same under absorption and variable costing if all production is sold. This is not true when only 75% of production is sold because all of the manufacturing overhead is charged against income under variable costing, but not absorption costing. 87,500 62,500 Notice that the $25,000 difference between ending inventory amounts ($87,500 and $62,500) is equal to the difference in income ($92,500 v. $67,500). This occurs because $25,000 of fixed manufacturing overhead is assigned to inventory under absorption costing but charged against income under variable costing. 80 Done
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