Use the following data for the next seven questions: Variable production costs $

Question

Use the following data for the next seven questions:

Variable production costs $480,000
Variable S and A costs $ 55,000
Fixed S and A costs $100,000
Fixed production costs $270,000
Unit sales price $8
Production in units 120,000
Sales in units 110,000

14. Under variable costing, the production cost per unit is:
A. $2.25
B. $6.25
C. $4.36
D. $4.00

15. Under full costing, the value of the ending inventory is:
A. $80,000.
B. $62,500.
C. $40,000.
D. $210,000.

16. Under full costing, net income (loss) is:
A. $37,500
B. $15,000
C. $(25,000)
D. None of the above.

17. Under variable costing, the contribution margin is:
A. $192,000
B. $345,000
C. $385,000
D. $400,000

18. Under full costing, the amount of deferred overhead is:
A. $0
B. $22,500
C. $270,000
D. None of the above.

19. Under variable costing, total period costs are:
A. $155,000
B. $177,500
C. $425,000
D. $370,000

20. Under full costing, cost of goods sold is:
A. $400,000
B. $495,000
C. $440,000
D. $687,500

21. When full costing net income equals variable costing net income, then:
A. production equals sales.
B. production is greater than sales.
C. production is less than sales.
D. None of the above.

Explanation / Answer

14. Cost per unit under variable costing: Answer: D Answer: D Variable production costs = $480,000
Production in units            = 120,000
Cost per unit ($480,000/120,000) = $4. 15. value of the ending inventory under full costing: Answer: B Answer: B Variable production costs = $480,000 Fixed production costs     = $270,000
Total production cost (480,000 +270,000) = $750,000 Units produced                 = 120,000
Prodcution cost per unit ($750,000/120,000) = $6.25 Ending inventory (120,000-110,000) = 10,000 units Ending inventory value (10,000 x $6.25) = $62,500. 16. Net income/loss under full costing: Answer: A Sales (110,000 x$8)                          = $880,000 Cost of goods sold (110,000x$6.25) = 687,500 Gross margin                                     = $192,500 Variable S&A costs                           = $ 55,000 Fixed S&A costs                                = $100,000 Net income (192,500 -155,000)         = $37,500 17. Contribution margin: Answer: B Sales (110,000 x$8)        = $880,000 Sales (110,000 x$8)        = $880,000 Variable production costs = $480,000 Variable S&A costs         = $ 55,000 Contribution margin (880,000 - 535,000) = $345,000 18. deferred overhead: Answer: B Answer: B Fixed production costs     = $270,000 Units produced                 = 120,000
Fixed production cost per unit = $2.25 Fixed production cost in ending inventory = 10,000 units x$2.25                                                                = $22,500 Fixed production cost in ending inventory = 10,000 units x$2.25                                                                = $22,500

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