CHAPTER13:STANDARDCOSTING,VARIABLECOSTING,ANDTHROUGHPUTCOSTING

MultipleChoice

a1.WhichofthefollowingisNOTatypeofabsorptioncosting?
a.Directcosting.
b.Actualcosting.
c.Normalcosting.
d.Noneoftheabove.

b2.VariablecostingisUNACCEPTABLEfor
a.managerialaccounting.
b.financialaccounting.
c.transferpricing.
d.reportingbyproductlinesforinternalpurposes.

d3.Acriticismofvariablecostingformanagerialaccountingpurposesisthatit
a.isnotacceptableforproductlinesegmentedreporting.
b.doesnotreflectcostvolumeprofitrelationships.
c.overstatesinventories.
d.mightencouragemanagerstoemphasizetheshorttermattheexpenseofthelongterm.

c4.Normalcostingandstandardcostingdifferinthat
a.thetwosystemscanshowdifferentoverheadbudgetvariances.
b.onlynormalcostingcanbeusedwithabsorptioncosting.
c.thetwosystemsshowdifferentvolumevariancesifstandardhoursdonotequalactualhours.
d.normalcostingislessappropriateformultiproductfirms.

d5.Variablecostingandabsorptioncostingwillshowthesameincomeswhenthereareno
a.beginninginventories.
b.endinginventories.
c.variablecosts.
d.beginningandendinginventories.

c6.ABChadthesameactivityin20X3asin20X2exceptthatproductionwashigherin20X3thanin20X2.ABC
willshow
a.higherincomein20X3thanin20X2.
b.thesameincomeinbothyears.
c.thesameincomeinbothyearsundervariablecosting.
d.thesameincomeinbothyearsunderabsorptioncosting.

b7.Theuseofvariablecostingrequiresknowing
a.thecontributionmarginandbreakevenpointforeachproduct.
b.thevariableandfixedcomponentsofproductioncost.
c.controllableandnoncontrollablecomponentsofallcosts.
d.thenumberofunitsofeachproductproducedduringtheperiod.

d8.WhichmeasureofactivityislikelytogivetheLOWESTstandardfixedcostperunit?
a.Actualactivity.
b.Normalcapacity.
c.Budgetedactivity.
d.Practicalcapacity.

c9.WhichitemisNOTusedtocomputethefixedoverheadvolumevariance?
a.Standardfixedcostperunit.
b.Budgetedfixedoverhead.
c.Actualfixedoverhead.
d.Actualquantityproduced.

b10.WhichvarianceisLEASTrelevantforcontrolpurposes?
a.Materialusevariance.
b.Fixedoverheadvolumevariance.
c.Fixedoverheadbudgetvariance.
d.Laborefficiencyvariance.

a11.Acompanythatsetsastandardfixedcostbasedonpracticalcapacity
a.shouldexpectunfavorablevolumevariances.
b.willsetitssellingpricestoolow.
c.hasahighercostperunitthanacompanyusingnormalactivitytosetthestandard.
d.usuallyoverappliesitsfixedcosts.

a12.Apredeterminedoverheadrateforfixedcostsisunlikeastandardfixedcostperunitinthata
predeterminedoverheadrateis
a.basedonaninputfactorlikedirectlaborhoursandastandardcostperunitisbasedonaunitof
output.
b.basedonpracticalcapacityandastandardfixedcostcanbebasedonanylevelofactivity.
c.usedwithvariablecostingwhileastandardfixedcostisusedwithabsorptioncosting.
d.likelytobehigherthanastandardfixedcostperunit.

b13.ABChad$400,000budgetedfixedoverheadcostsandbaseditsstandardonnormalactivityof40,000units.
Actualfixedoverheadcostswere$430,000,actualproductionwas36,000units,andsaleswere30,000
units.Thevolumevariancewas
a.$30,000.
b.$40,000.
c.$70,000.
d.$77,777.

a14.AdvocatesofvariablecostingforinternalreportingpurposesdoNOTrelyonwhichofthefollowing
points?
77
77
 a.Thematchingconcept.
b.Pricevolumerelationships.
c.Absorptioncostingdoesnotincludesellingandadministrativeexpensesaspartofinventoriablecost.
d.Productioninfluencesincomeunderabsorptioncosting.

d15.CalculatingincomeundervariablecostingdoesNOTrequireknowing
a.unitsales.
b.unitvariablemanufacturingcosts.
c.sellingprice.
d.unitproduction.

a16.Inventoriablecostsunderabsorptioncostinginclude
a.bothfixedandvariableproductioncosts.
b.onlyvariableproductioncosts.
c.allproductioncostsplusvariablesellingandadministrativecosts.
d.allproductioncostsplusallsellingandadministrativecosts.

b17.Inventoriablecostsundervariablecostinginclude
a.fixedandvariableproductioncosts.
b.variableproductioncosts.
c.allproductioncostsplusvariablesellingandadministrativecosts.
d.allproductioncostsplusallsellingandadministrativecosts.

d18.Absorptioncostingandvariablecostingdifferinthat
a.incomeislowerundervariablecosting.
b.variablecostingtreatssellingcostsasperiodcosts.
c.variablecostingtreatsallvariablecostsasproductcosts.
d.inventorycostishigherunderabsorptioncosting.

c19.Absorptioncostingdiffersfromvariablecostinginthat
a.standardscanbeusedwithabsorptioncosting,butnotwithvariablecosting.
b.absorptioncostinginventoriesaremorecorrectlyvalued.
c.productioninfluencesincomeunderabsorptioncosting,butnotundervariablecosting.
d.companiesusingabsorptioncostinghavelowerfixedcosts.

a20.Whichmethodgivesthelowestinventorycostperunit?
a.Variablecosting.
b.Absorptioncostingusingnormalactivitytosetthestandardfixedcost.
c.Absorptioncostingusingpracticalcapacitytosetthestandardfixedcost.
d.Actualabsorptioncosting.

b21.Whichcostsaretreateddifferentlyunderabsorptioncostingandvariablecosting?
a.Variablemanufacturingcosts.
b.Fixedmanufacturingcosts.
c.Variablesellingandadministrativeexpenses.
d.Fixedsellingandadministrativeexpenses.

a22.ABCCompanyhad15,000unitsinendinginventory.Thetotalcostofthoseunitsundervariablecostingis
a.lessthanitisunderabsorptioncosting.
b.thesameasitisunderabsorptioncosting.
c.morethanitisunderabsorptioncosting.
d.anyoftheabove.

b23.YorkCompanyhad$200,000incomeusingabsorptioncosting.Yorkhasnovariablemanufacturingcosts.
Beginninginventorywas$15,000andendinginventorywas$22,000.Incomeundervariablecostingwould
havebeen
a.$178,000.
b.$193,000.
c.$200,000.
d.$207,000.

c24.Anunfavorablevolumevariancemeansthat
a.costcontrolwasprobablypoor.
b.absorptioncostingincomeislowerthanvariablecostingincome.
c.actualoutputwaslessthanthelevelusedtosetthestandardfixedcost.
d.actualoutputwasmorethanthelevelusedtosetthestandardfixedcost.

d25.WhichvarianceCANNOTariseundervariablecosting?
a.variableoverheadbudgetvariance.
b.variableoverheadefficiencyvariance.
c.fixedoverheadbudgetvariance.
d.fixedoverheadvolumevariance.

a26.Standardcostingdiffersfromnormalcostinginthetreatmentof
a.materials,directlabor,andoverhead.
b.materialsanddirectlabor.
c.directlaborandoverhead.
d.overhead.

d27.Normalcostingdiffersfromactualcostingintreating
a.materials,directlabor,andoverhead.
b.materialsanddirectlabor.
c.directlaborandoverhead.
d.overhead.

c28.Ascomparedtonormalcosting,standardcostingcanyield
a.differentvolumevariancesandbudgetvariances.
b.differentbudgetvariances.
78
78
 c.differentvolumevariances.
d.noneoftheabove.

c29.Undervariablecostingtherecanbeno
a.fixedoverheadvariances.
b.fixedoverheadbudgetvariance.
c.fixedoverheadvolumevariance.
d.nofixedoverhead.

c30.ABChadthesameactivityin20X4asin20X3exceptthatproductionwaslowerin20X4thanin20X3.ABC
willshow
a.lowerincomein20X4thanin20X3.
b.thesameincomeinbothyears.
c.thesameincomeinbothyearsundervariablecosting.
d.thesameincomeinbothyearsunderabsorptioncosting.

a31.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Endinginventoryunder
variablecostingwouldbe
a.$20,000.
b.$30,000.
c.$35,000.
d.cannotbedeterminedwithoutfurtherinformation.

c32.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Endinginventoryunder
absorptioncostingwouldbe
a.$20,000.
b.$30,000.
c.$35,000.
d.cannotbedeterminedwithoutfurtherinformation.

a33.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thevolumevarianceunder
variablecostingwouldbe
a.$0.
b.$20,000.
c.$30,000.
d.someothernumber.

c34.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thevolumevarianceunder
absorptioncostingwouldbe
a.$0.
b.$20,000.
c.$30,000.
d.someothernumber.

b35.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thestandardcostof
goodssoldundervariablecostingwouldbe
a.$400,000.
b.$420,000.
c.$735,000.
d.someothernumber.

c36.RounderIndustriesmanufacturesasingleproduct.Variableproductioncostsare$20andfixedproduction
costsare$300,000.Rounderusesanormalactivityof20,000unitstosetitsstandardcosts.Rounder
begantheyearwithnoinventory,produced22,000units,andsold21,000units.Thestandardcostof
goodssoldunderabsorptioncostingwouldbe
a.$400,000.
b.$420,000.
c.$735,000.
d.someothernumber.

c37.AlphaCompanyhasastandardfixedcostof$10perunit.Atanactualproductionof16,000unitsan
unfavorablevolumevarianceof$20,000resulted.Whatweretotalbudgetedfixedcosts?
a.$140,000
b.$160,000
c.$180,000
d.Cannotbedeterminedwithoutfurtherinformation.

a38. BetaCompanyhasastandardfixedcostof$10perunitusinganormalcapacityof11,000units.An
unfavorablevolumevarianceof$12,000resulted.Whatwasthevolumeproduced?
a.9,800
b.11,000
c.12,200
d.Cannotbedeterminedwithoutfurtherinformation.

a39. GammaCorporationhastotalbudgetedfixedcostsof$150,000.Actualproductionwas8,000units;normal
capacityis7,500units.Whatwasthevolumevariance?
a.$10,000favorable
b.$15,000favorable
79
79
 c.$15,000unfavorable
d.$10,000unfavorable

b40. EasternCo.hastotalbudgetedfixedcostsof$150,000.Actualproductionof39,000unitsresultedina
$6,000favorablevolumevariance.Whatnormalcapacitywasusedtodeterminethefixedoverheadrate?
a.33,000
b.37,500
c.40,560
d.Cannotbedeterminedwithoutfurtherinformation.

a41. WesternCompanyhasastandardfixedcostof$8perunit.Atanactualproductionof8,000unitsa
favorablevolumevarianceof$12,000resulted.Whatweretotalbudgetedfixedcosts?
a.$52,000
b.$64,000
c.$76,000
d.Cannotbedeterminedwithoutfurtherinformation.

d42. MononaCorporationhastotalbudgetedfixedcostsof$64,000.Actualproductionwas15,000units;normal
capacityis16,000units.Whatwasthevolumevariance?
a.$4,000favorable
b.$4,267favorable
c.$4,267unfavorable
d.$4,000unfavorable

b43.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Endinginventoryundervariablecostingwouldbe
a.$10,000.
b.$13,000.
c.$23,000.
d.cannotbedeterminedwithoutfurtherinformation.

c44.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Endinginventoryunderabsorptioncostingwouldbe
a.$10,000.
b.$13,000.
c.$23,000.
d.cannotbedeterminedwithoutfurtherinformation.
d45.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thevolumevarianceundervariablecostingwouldbe
a.$10,000.
b.$20,000.
c.$30,000.
d.someothernumber.

c46.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thevolumevarianceunderabsorptioncostingwouldbe
a.$10,000.
b.$20,000.
c.$30,000.
d.someothernumber.

b47.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thestandardcostofgoodssoldundervariablecostingwouldbe
a.$230,000.
b.$299,000.
c.$506,000.
d.$529,000.

c48. SigmaCompanyhasastandardfixedcostof$18perunitusinganormalcapacityof9,000units.A
favorablevolumevarianceof$18,000resulted.Whatwasthevolumeproduced?
a.8,000
b.9,000
c.10,000
d.Cannotbedeterminedwithoutfurtherinformation.

c49. WesternCo.hastotalbudgetedfixedcostsof$72,000.Actualproductionof5,500unitsresultedina
$6,000unfavorablevolumevariance.Whatnormalcapacitywasusedtodeterminethefixedoverheadrate?
a.5,000
b.5,500
c.6,000
d.Cannotbedeterminedwithoutfurtherinformation.

d50.MadisonIndustriesmanufacturesasingleproductusingstandardcosting.Variableproductioncostsare$26
andfixedproductioncostsare$250,000.Madisonusesanormalactivityof12,500unitstosetits
standardcosts.Madisonbegantheyearwith1,000unitsininventory,produced11,000units,andsold
11,500units.Thestandardcostofgoodssoldunderabsorptioncostingwouldbe
a.$230,000.
b.$299,000.
80
80
 c.$506,000.
d.$529,000.

TrueFalse

F1.Absorptioncostingincomesarealwayshigherthanvariablecostingincomes.

F2.Incomeunderstandardvariablecostingisnotinfluencedbythetotalamountoffixedmanufacturingcosts.

T3.Amultiproductcompanyusingstandardabsorptioncostingcalculatesstandardfixedcostsforeachproduct
usingastandardfixedoverheadratebasedonaninputfactorsuchasdirectlaborhours.

T4.Amajordifferencebetweenstandardcostingandnormalcostingisthatoneusesactualhourstoapply
overheadandtheotherusesstandardhours.

T5.Proponentsofvariablecostingforexternalreportingarguethatwhilefixedproductioncostsbenefit
productionasawhole,theydonotbenefitanyparticularunitofproduct.

T6.Acompanyusingabsorptioncostingcanincreaseitsincomebyincreasingproductionwithoutincreasing
sales.

F7.Acompanyusingvariablecostingcanincreaseitsincomebyincreasingproductionwithoutincreasing
sales.

F8.Variablecostingmustbeusedforinternalreporting.

F9.AccordingtoGAAP,absorptioncostingmustbeusedforinternalreporting.

T10.AccordingtoGAAP,absorptioncostingmustbeusedforexternalfinancialreporting.

Problems

1.WhitehallCompanysellsasingleproductfor$25.Ithadnobeginninginventories.Operatingdatafollow.

Sales,27,000units$675,000
Normalcapacity30,000units
Productioncosts:
Variableperunit$13
Fixedproduction$150,000
Sellingandadministrativeexpenses:
Variableperunitsold$2
Fixedselling$20,000
Numberofunitsproduced32,500units

Assumetheactualcostswereasbudgeted.

a. Findcontributionmarginperunit.

b. Computetheendinginventoryunderstandardvariablecosting.

c. Computetheincomeunderstandardvariablecosting.

Assumestandardabsorptioncostingusingnormalcapacityasthebasisforcomputingthestandardfixedcost
perunit.Compute

d. Standardgrossprofitperunit.

e. Endinginventory.

f. Volumevariance.

g. Income.

SOLUTION:

a. $10($25$13$2)

b. $71,500[$13xendinginventoryof5,500units(32,50027,000)]

c. $100,000[(27,000x$10)($150,000+$20,000)]

d. $7[$25$13($150,000/30,000)]

e. $99,000[5,500x($13+$5)]

f. $12,500F[(32,50030,000)x$5standardfixedcostperunit]

g. $127,500[(27,000x$7)+$12,500(27,000x$2)$20,000]

2.LundCompanysellsasingleproductfor$25.Ithadnobeginninginventories.Operatingdatafollow.

Sales,55,000units$1,375,000
Normalcapacity60,000units
Productioncosts:
Variableperunit$13
Fixedproduction$300,000
Sellingandadministrativeexpenses:
Variableperunitsold$2
81
81
 Fixedselling$40,000
Numberofunitsproduced66,000units

Assumetheactualcostswereasbudgeted.

a.Computeincomeunderstandardvariablecosting.

b.Computeincomeunderstandardabsorptioncosting.

SOLUTION:

a. $210,000[55,000x($25132)($300,000+$40,000)]

b. $265,000{$1,375,00055,000x[$13+($300,000/60,000)]55,000x$2
$40,000+$30,000volumevariance}

3.MaidenRockCompanysellsasingleproductfor$25.Ithadnobeginninginventories.Operatingdatafollow.

Sales,20,000units$500,000
Normalcapacity30,000units
Productioncosts:
Variableperunit$13
Fixedproduction$150,000
Sellingandadministrativeexpenses:
Variableperunitsold$2
Fixedselling$20,000
Numberofunitsproduced32,500units

Assumetheactualcostswereasbudgeted.

a. FindMaidenRocksincomeunderstandardvariablecosting.

b. FindMaidenRocksincomeunderstandardabsorptioncosting.

SOLUTION:

a. $30,000[20,000x($25132)($150,000+$20,000)]

b. $92,500{$500,00020,000x[$13+[$150,000/30,000)]20,000x$2
$20,000+$12,500volumevariance}

4. GencoInc.makesasingleproductthatsellsfor$50.Thestandardvariablemanufacturingcostis$32.50and
thestandardfixedmanufacturingcostis$7.50,basedonproducing20,000units.DuringtheyearGenco
produced22,000unitsandsold21,000units.Actualfixedmanufacturingcostswere$157,000;actualvariable
manufacturingcostswere$735,000.Sellingandadministrativeexpenses,allfixed,were$75,000.Therewere
nobeginninginventories.

a. Prepareastandardabsorptioncostingincomestatement.

b. Prepareastandardvariablecostingincomestatement.

SOLUTION:

a. Sales(21,000x$50)$1,050,000
CostofGoodsSold(21,000x$40)$840,000
Variances:
VariableSpending$20,000Un
FixedSpending7,000Un
Volume(15,000)F12,000
AdjustedCostofGoodsSold852,000
GrossProfit$198,000
Selling&Administrative75,000
NetIncome$123,000

b. Sales$1,050,000
VariableCosts(21,000x$32.50)$682,500
VariableSpendingVariance20,000Un
AdjustedVariableCostofGoodsSold702,500
ContributionMargin$347,500
FixedCosts:
Manufacturing$157,000
Selling&Administrative75,000232,000
NetIncome$115,500

5. BrahmsCorp.hasthefollowingdata:

Normalcapacity25,000
Practicalcapacity30,000
Budgetedproduction20,000
Actualproduction22,000
Actualsales($25perunit)21,000
Standardvariableproductioncostperunit$15
Budgetedfixedproductioncosts$120,000

Therewerenovariablecostvariancesfortheyear.Fixedcostsincurredwereequaltothebudgetedamount.
Therewerenobeginninginventoriesandnosellingoradministrativeexpenses.

82
82
a. Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingnormalcapacity.

b. Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingpracticalcapacity.

c. Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingbudgetedproduction.

d. Computethevariablecostingincome.

SOLUTION:

a. $94,800[$525,000(21,000x$19.80)$14,400volumevariance]

Volumevariance$14,400=$120,000/25,000x22,000$120,000

b. $94,000[$525,000(21,000x$19)$32,000volumevariance]

Volumevariance$32,000=$120,000/30,000x22,000$120,000

c. $96,000[$525,000(21,000x$21)+$12,000volumevariance]

Volumevariance$12,000=$120,000/20,000x22,000$120,000

d. $90,000[$525,000(21,000x$15)$120,000]

6.CumberlandCompanysellsasingleproductfor$30.Ithadnobeginninginventories.Operatingdatafollow.

Sales,12,000units$360,000
Normalcapacity20,000units
Productioncosts:
Variableperunit$15
Fixedproduction$75,000
Sellingandadministrativeexpenses:
Variableperunitsold$5
Fixedselling$25,000
Numberofunitsproduced13,000units

Assumetheactualcostswereasbudgeted.

a. Findcontributionmarginperunit.

b. Computetheendinginventoryunderstandardvariablecosting.

c. Computetheincomeunderstandardvariablecosting.

Assumestandardabsorptioncostingusingnormalcapacityasthebasisforcomputingthestandardfixedcost
perunit.Compute

d. Standardgrossprofitperunit.

e. Endinginventory.

f. Volumevariance.

g. Income.

SOLUTION:

a. $10($30$15$5)

b. $15,000[$15xendinginventoryof1,000units(13,00012,000)]

c. $20,000[(12,000x$10)($75,000+$25,000)]

d. $11.25[$30$15($75,000/20,000)]

e. $18,750[1,000x($15+$3.75)]

f. $26,250U[(20,00013,000)x$3.75standardfixedcostperunit]

g. $23,750[(12,000x$11.25)$26,250(12,000x$5)$25,000]

7.AcmeCompanysellsasingleproductfor$30.Ithadnobeginninginventories.Operatingdatafollow.

Sales,12,000units$360,000
Normalcapacity15,000units
Productioncosts:
Variableperunit$17
Fixedproduction$75,000
Sellingandadministrativeexpenses:
Variableperunitsold$5
Fixedselling$25,000
Numberofunitsproduced13,500units

Assumetheactualcostswereasbudgeted.

a.Computeincomeunderstandardvariablecosting.

b.Computeincomeunderstandardabsorptioncosting.
83
83

SOLUTION:

a. $(4,000)[(12,000x($30$17$5)($75,000+$25,000)]

b. $3,500{$360,00012,000x[$17+($75,000/15,000)]12,000x$5
$25,000$7,500volumevariance}

8.CarlsonCompanysellsasingleproductfor$30.Ithadnobeginninginventories.Operatingdatafollow.

Sales,12,500units$375,000
Normalcapacity15,000units
Productioncosts:
Variableperunit$17
Fixedproduction$75,000
Sellingandadministrativeexpenses:
Variableperunitsold$5
Fixedselling$25,000
Numberofunitsproduced13,000units

Assumetheactualcostswereasbudgeted.

a. FindCarlsonsincomeunderstandardvariablecosting.

b. FindCarlsonsincomeunderstandardabsorptioncosting.

SOLUTION:

a. $0[12,500x($30$17$5)($75,000+$25,000)]

b. $2,500{$375,00012,500x[$17+($75,000/15,000)]12,500x$5
$25,000$10,000volumevariance}

9. BachInc.makesasingleproductthatsellsfor$40.Thestandardvariablemanufacturingcostis$22andthe
standardfixedmanufacturingcostis$8,basedonproducing30,000units.DuringtheyearBachproduced
28,000unitsandsold26,000units.Actualfixedmanufacturingcostswere$235,000;actualvariable
manufacturingcostswere$595,000.Sellingandadministrativeexpenseswere$95,000.Therewerenobeginning
inventories.

a. Prepareastandardabsorptioncostingincomestatement.

b. Prepareastandardvariablecostingincomestatement.

SOLUTION:

a. Sales(26,000x$40)$1,040,000
CostofGoodsSold(26,000x$30)$780,000
Variances:
VariableSpending$(21,000)F
FixedSpending(5,000)F
Volume16,000Un(10,000)
AdjustedCostofGoodsSold770,000
GrossProfit$270,000
Selling&Administrative95,000
NetIncome$175,000

b. Sales$1,040,000
VariableCosts(26,000x$22)$572,000
VariableSpendingVariance(21,000)F
AdjustedVariableCostofGoodsSold551,000
ContributionMargin$489,000
FixedCosts:
Manufacturing235,000
Selling&Administrative95,000330,000
NetIncome$159,000

10.HaydenCorp.hasthefollowingdata:

Normalcapacity40,000
Practicalcapacity45,000
Budgetedproduction30,000
Actualproduction35,000
Actualsales($20perunit)32,000
Standardvariableproductioncostperunit$12
Budgetedfixedproductioncosts$135,000

Therewerenovariablecostvariancesfortheyear.Fixedcostsincurredwereequaltothebudgetedamount.
Therewerenobeginninginventoriesandnosellingoradministrativeexpenses.

a. Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingnormalcapacity.

b. Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingpracticalcapacity.

c. Computetheabsorptioncostingincomeiffixedcostsperunitaredeterminedusingbudgetedproduction.

d. Computethevariablecostingincome.

SOLUTION:
84
84
a. $131,125[$640,000(32,000x$15.375)$16,875volumevariance]

Volumevariance$16,875=$135,000/40,000x35,000$135,000

b. $130,000[$640,000(32,000x$15)$30,000volumevariance]

Volumevariance$30,000=$135,000/30,000x35,000$135,000

c. $134,500[$640,000(32,000x$16.50)+$22,500volumevariance]

Volumevariance$22,500=$135,000/30,000x35,000$135,000

d. $121,000[$640,000(32,000x$12)$135,000]

85
85