1. The manufacturing cost per unit for absorption costing is usually, but not al
ID: 2487077 • Letter: 1
Question
1. The manufacturing cost per unit for absorption costing is usually, but not always,
A. higher than manufacturing cost per unit for variable costing.
B. usually, but not always, lower than manufacturing cost per unit for variable costing.
C. always higher than manufacturing cost per unit for variable costing.
D. always lower than manufacturing cost per unit for variable costing.
2. The one primary difference between variable and absorption costing is that under
A.variable costing, companies charge the fixed manufacturing overhead as an expense in the current period.
B. absorption costing, companies charge the fixed manufacturing overhead as an expense in the current period.
C. variable costing, companies charge the variable manufacturing overhead as an expense in the current period.
D. absorption costing, companies charge the variable manufacturing overhead as an expense in the current period.
3. Capitol Manufacturing sells 3,000 units of Product A annually, and 7,000 units of Product B annually. The sales mix for Product A is
A. 30%
B. 43%
C. 70%
D. CAN NOT DETERMINE
Explanation / Answer
1. C. always higher than manufacturing cost per unit for variable costing.
Absorption costing always includes fixed overheads also while calculating manufacturing cost. However, under variable costing only variable overheads are included. Thus manufacturing cost under absorption costing method is always higher than variable costing method.
2. A.variable costing, companies charge the fixed manufacturing overhead as an expense in the current period.
This is because the cost of the ending inventory is higher under absorption costing than under variable costing. Some part of fixed overheads are also charge dto inventory under absorption costing while fixed cost is fully charged under variable costing in current period and nothing is carried over in inventory cost to next period.
3. Sales mix for Product A = 3000 / 10000 * 100 = 30%
A. 30%
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