Test bank managerial accounting by garrison 13e chapter 07

When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be added to vari

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True/False Questions

1 Under variable costing, only variable production costs are treated as product costs

Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

2 Under variable costing, variable selling and administrative costs are included in product costs

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

3 Absorption costing treats all manufacturing costs as product costs

4 In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost

5 Absorption costing treats fixed manufacturing overhead as a period cost

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy

6 When the number of units in work in process and finished goods inventories increase, absorption costing net operating income will typically be greater than variable costing net operating income

Ans: True AACSB: Analytic AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2,3 Level: Easy

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8 When reconciling variable costing and absorption costing net operating income, fixed manufacturing overhead costs released from inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium

9 When production exceeds sales for the period, absorption costing net operating

income will exceed variable costing net operating income

AICPA FN: Reporting LO: 3 Level: Medium

10 Under variable costing it may be possible to report a profit even if the company sells less than the break-even volume of sales

Ans: False AACSB: Analytic AICPA BB: Critical Thinking

11 Absorption costing net operating income is closer to the net cash flow of a period than

is variable costing net operating income

Ans: False AACSB: Analytic AICPA BB: Critical Thinking

12 Variable costing is not permitted for income tax purposes, but it is widely accepted for external financial reports

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium

13 A basic concept of the contribution approach and variable costing is that fixed costs are not important in an organization

Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking

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15 When lean production is introduced, the difference in net operating income computed under the absorption and variable costing methods is reduced.

AICPA FN: Reporting LO: 5 Level: Easy

Multiple Choice Questions

16 How would the following costs be classified (product or period) under variable costing

at a retail clothing store?

Cost of purchasing clothing Sales commissions

Ans: B AACSB: Analytic AICPA BB: Critical Thinking

17 The principal difference between variable costing and absorption costing centers on:A) whether variable manufacturing costs should be included as product costs.B) whether fixed manufacturing costs should be included as product costs

C) whether fixed manufacturing costs and fixed selling and administrative costs should be included as product costs

D) none of these

18 Which of the following costs at a manufacturing company would be treated as a product cost under the variable costing method?

A) direct material cost

B) property taxes on the factory building

C) sales manager's salary

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19 Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that:

A) variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs

B) variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs

C) variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion

of fixed manufacturing overhead as product costs

D) variable costing treats only direct materials, direct labor, and the variable portion

of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs

Ans: D AACSB: Analytic AICPA BB: Critical Thinking

20 The costing method that treats all fixed costs as period costs is:

A) absorption costing

B) job-order costing

C) variable costing

D) process costing

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking

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21 In its first year of operations, Bronfren Corporation produced 800,000 sets and sold 780,000 sets of artificial tan lines What would have happened to net operating income

in this first year under the following costing methods if Bronfren had produced 20,000fewer sets? (Assume that Bronfren has both variable and fixed production costs.)Variable costing Absorption costing

A) Increase Increase

B) Decrease Increase

C) Decrease Decrease

D) No effect Decrease

22 When sales are constant, but the production level fluctuates, net operating income determined by the variable costing method will:

A) fluctuate in direct proportion to changes in production

B) remain constant

C) fluctuate inversely with changes in production

D) be greater than net operating income under absorption costing

23 Under the variable costing method, which of the following is always expensed in its entirety in the period in which it is incurred?

A) fixed manufacturing overhead cost

B) fixed selling and administrative expense

C) variable selling and administrative expense

D) all of the above

Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2 Level: Hard

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24 Which of the following will usually be found on an income statement prepared using the absorption costing method?

Contribution Margin Gross Margin

Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking

25 Net operating income under variable and absorption costing will generally:

A) always be equal

B) never be equal

C) be equal only when production and sales are equal

D) be equal only when production exceeds sales

Ans: C AACSB: Analytic AICPA BB: Critical Thinking

26 When production exceeds sales, net operating income reported under variable costing generally will be:

A) greater than net operating income reported under absorption costing

B) less than net operating income reported under absorption costing

C) equal to net operating income reported under absorption costing

D) higher or lower because no generalization can be made

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27 Net operating income under absorption costing may differ from net operating income determined under variable costing How is this difference calculated?

A) change in the quantity of units in inventory times the fixed manufacturing overhead rate per unit

B) number of units produced during the period times the fixed manufacturing overhead rate per unit

C) change in the quantity of units in inventory times the variable manufacturing cost per unit

D) number of units produced during the period times the variable manufacturing cost per unit

Ans: A AACSB: Analytic AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 3 Level: Hard Source: CMA, adapted

28 When sales are constant, but the production level fluctuates, net operating income determined by the absorption costing method will:

A) tend to fluctuate in the same direction as fluctuations in the level of production.B) tend to remain constant

C) tend to fluctuate inversely with fluctuations in the level of production

D) none of these

29 A reason why absorption costing income statements are sometimes difficult for the manager to interpret is that:

A) they omit variable expenses entirely in computing net operating income

B) they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories

C) they include all fixed manufacturing overhead on the income statement each year as a period cost

D) they ignore inventory levels in computing income charges

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30 Under the theory of constraints (TOC), which of the following is treated as a period cost?

Direct labor Direct material

Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking

31 Fleet Corporation produces a single product The company manufactured 700 units last year The ending inventory consisted of 100 units There was no beginning

inventory Variable manufacturing costs were $6.00 per unit and fixed manufacturing costs were $2.00 per unit What would be the change in the dollar amount of ending inventory if variable costing was used instead of absorption costing?

A) $800 decrease

B) $200 decrease

C) $0

D) $200 increase

AICPA FN: Reporting LO: 1 Level: Easy Source: CMA, adapted

Solution:

Change in inventory × Fixed manufacturing costs per unit

= 100 × $2 = $200 decrease

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32 Shun Corporation manufactures and sells a hand held calculator The following information relates to Shun's operations for last year:

Unit product cost under variable costing $5.20 per unit

Fixed manufacturing overhead cost for the year $260,000

Fixed selling and administrative cost for the year $180,000

Units (calculators) produced and sold 400,000

What is Shun's unit product cost under absorption costing for last year?

A) $4.10

B) $4.55

C) $5.85

D) $6.30

Solution:

Unit fixed manufacturing overhead = Fixed manufacturing overhead ÷ Units produced

= $260,000 ÷ 400,000 units = $0.65 per unit

Unit product cost = $5.20 + $0.65 = $5.85

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33 A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Units in beginning inventory 0

Units produced 7,100 Units sold 7,000 Units in ending inventory 100

Variable costs per unit: Direct materials $33

Direct labor $53

Variable manufacturing overhead $1

Variable selling and administrative $7

Fixed costs: Fixed manufacturing overhead $170,400 Fixed selling and administrative $7,000 What is the unit product cost for the month under variable costing? A) $118 B) $94 C) $111 D) $87 Ans: D AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead

= $33 + $53 + $1 = $87

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Direct labor $32

Fixed costs: Fixed manufacturing overhead $72,200 Fixed selling and administrative $6,800 What is the unit product cost for the month under absorption costing? A) $67 B) $105 C) $111 D) $73 Ans: B AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Unit fixed manufacturing overhead = $72,200 ÷ 1,900 = $38

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead cost + Fixed manufacturing overhead cost

= $33 + $32 + $2 + $38 = $105

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Selling price $79

Direct labor $30

Fixed costs: Fixed manufacturing overhead $46,200 Fixed selling and administrative $88,200 What is the total period cost for the month under the variable costing approach? A) $138,600 B) $134,400 C) $46,200 D) $184,800 Ans: D AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Total variable selling and administrative cost = $8 × 6,300 = $50,400

Period cost = Total variable selling and administrative cost + Fixed manufacturing overhead + Fixed selling and administrative cost

= $50,400 + $46,200 + $88,200 = $184,800

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Selling price $97

Direct labor $25

Fixed costs: Fixed manufacturing overhead $8,800 Fixed selling and administrative $37,800 What is the total period cost for the month under the absorption costing approach? A) $56,700 B) $65,500 C) $8,800 D) $37,800 Ans: A AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Total variable selling and administrative cost = $9 × 2,100 = $18,900

Period cost = Variable selling and administrative cost + Fixed selling and

administrative cost = $18,900 + $37,800 = $56,700

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37 Mullee Corporation produces a single product and has the following cost structure: Number of units produced each year 7,000

Variable costs per unit:

Direct materials $51

Direct labor $12

Variable selling and administrative expense $5

Fixed costs per year: Fixed manufacturing overhead $441,000 Fixed selling and administrative expense $112,000 The unit product cost under absorption costing is: A) $149 B) $65 C) $63 D) $128 Ans: D AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Unit product cost = $63 + $51 + $12 + $2 = $128

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38 Stoneberger Corporation produces a single product and has the following cost

structure:

Number of units produced each year 4,000

Direct labor $72

Fixed costs per year: Fixed manufacturing overhead $296,000 Fixed selling and administrative expense $76,000 The unit product cost under variable costing is: A) $128 B) $125 C) $202 D) $131 Ans: A AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Unit product cost = $50 + $72 + $6 = $128

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39 Beamish Inc., which produces a single product, has provided the following data for its most recent month of operations:

Number of units produced 8,000

Direct labor $56

Fixed costs: Fixed manufacturing overhead $312,000 Fixed selling and administrative expense $448,000 There were no beginning or ending inventories The unit product cost under absorption costing was: A) $93 B) $97 C) $136 D) $194 Ans: C AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Unit product cost = $37 + $56 + $4 + $39 = $136

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40 Kray Inc., which produces a single product, has provided the following data for its most recent month of operations:

Number of units produced 3,000

Direct labor $13

Fixed costs: Fixed manufacturing overhead $237,000 Fixed selling and administrative expense $165,000 There were no beginning or ending inventories The unit product cost under variable costing was: A) $111 B) $190 C) $117 D) $110 Ans: A AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead

= $91 + $13 + $7 = $111

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41 The following data pertain to last year's operations at Clarkson, Incorporated, a

company that produces a single product:

Units produced 100,000

Units sold 98,000

Selling price per unit $10.00

Direct materials $1.50

Direct labor $2.50

Variable manufacturing overhead $1.00

Variable selling and administrative $2.00

Fixed costs per year:

Fixed manufacturing overhead $200,000

Fixed selling and administrative $50,000

What was the absorption costing net operating income last year?

A) $44,000

B) $48,000

C) $50,000

D) $49,000

Solution:

Unit product cost = $1.50 + $2.50 + $1 + $2 = $7

Absorption costing income statement

Sales ($10 × 98,000) $980,000

Cost of goods sold ($7 × 98,000) 686,000

Gross margin 294,000

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Selling price $135

Direct labor $38

Fixed costs: Fixed manufacturing overhead $108,800 Fixed selling and administrative $74,400 The total contribution margin for the month under the variable costing approach is: A) $155,000 B) $260,400 C) $192,200 D) $83,400 Ans: C AACSB: Analytic AICPA BB: Critical Thinking

AICPA FN: Reporting LO: 2 Level: Easy Solution: Sales revenue ($135 × 6,200) $837,000 Variable cost:

Direct materials ($49 × 6,200) $303,800

Direct labor ($38 × 6,200) 235,000

Variable manufacturing overhead ($6 × 6,200) 37,200

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Selling price $123

Units produced 1,000 Units sold 900

Units in ending inventory 100

Direct labor $26

Fixed costs: Fixed manufacturing overhead $17,000 Fixed selling and administrative $11,700 What is the net operating income for the month under variable costing? A) $12,700 B) $5,600 C) $1,700 D) $14,400 Ans: A AACSB: Analytic AICPA BB: Critical Thinking

Solution:

Sales ($123 × 900) $110,700

Variable cost of goods sold ($71 × 900) 63,900

Less variable selling and administrative ($6 × 900) 5,400

Contribution margin 41,400

Fixed cost:

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44 Swifton Company produces a single product Last year, the company had net operatingincome of $40,000 using variable costing Beginning and ending inventories were 22,000 and 27,000 units, respectively If the fixed manufacturing overhead cost was

$3.00 per unit, what was the income using absorption costing?

A) $15,000

B) $25,000

C) $40,000

D) $55,000

Solution:

Difference between absorption costing net income and variable costing net income = Change in inventory in units × Unit fixed manufacturing overhead

= (27,000 − 22,000) × $3 = 5,000 × $3 = $15,000

Net income under absorption costing = $40,000 + $15,000 = $55,000

45 Blake Company produces a single product Last year, Blake's net operating income under absorption costing was $3,600 lower than under variable costing The company sold 10,000 units during the year, and its variable costs were $9 per unit, of which $1 was variable selling expense If production cost was $11 per unit under absorption costing, then how many units did the company produce during the year?

A) 8,200 units

B) 8,800 units

C) 11,200 units

D) 11,800 units

Solution:

Direct material + Direct labor + Variable manufacturing overhead

= Variable unit product cost = $9 – $1 = $8

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46 Pungent Corporation manufactures and sells a spice rack Shown below are the actual operating results for the first two years of operations:

Year 1 Year 2Units (spice racks) produced 40,000 40,000

Units (spice racks) sold 37,000 41,000

Absorption costing net operating income $44,000 $52,000

Variable costing net operating income $38,000 ???

Pungent's cost structure and selling price were the same for both years What is

Pungent's variable costing net operating income for Year 2?

A) $48,000

B) $50,000

C) $54,000

D) $56,000

Solution:

Unit fixed manufacturing overhead = Difference in net income ÷ Change in inventory

= ($44,000 – $38,000) ÷ (40,000 – 37,000) = $6,000 ÷ 3,000 = $2

Variable costing net operating income = Absorption costing net income − Difference

in net operating income

= $52,000 − [(40,000 − 41,000) × $2)]

= $52,000 − ($2,000) = $54,000

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47 Sipho Corporation manufactures a variety of products Last year, the company's variable costing net operating income was $90,900 Fixed manufacturing overhead costs released from inventory under absorption costing amounted to $21,900 What was the absorption costing net operating income last year?

A) $69,000

B) $90,900

C) $21,900

D) $112,800

B) $74,100

C) $63,400

D) $52,700

Solution:

Absorption costing net income = Variable costing net income – fixed manufacturing overhead costs released from inventory

= $63,400 – $10,700 = $52,700

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49 Bellue Inc manufactures a variety of products Variable costing net operating income was $96,300 last year and ending inventory decreased by 2,600 units Fixed

manufacturing overhead cost was $1 per unit What was the absorption costing net operating income last year?

A) $2,600

B) $93,700

C) $96,300

D) $98,900

Solution:

Absorption costing net income = Variable costing net income − fixed manufacturing overhead costs released from inventory

= $96,300 − [2,600 × $1] = $96,300 − $2,600 = $93,700

50 Last year, Tinklenberg Corporation's variable costing net operating income was

$52,400 and its ending inventory decreased by 1,400 units Fixed manufacturing overhead cost was $8 per unit What was the absorption costing net operating income last year?

A) $41,200

B) $11,200

C) $63,600

D) $52,400

Solution:

Absorption costing net income = Variable costing net income − fixed manufacturing overhead costs released from inventory

= $52,400 − [1,400 × $8] = $52,400 − $11,200 = $41,200

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Use the following to answer questions 51-53:

Hurlex Company produces a single product Last year, Hurlex manufactured 15,000 units and sold 12,000 units Production costs for the year were as follows:

Direct materials $150,000

Direct labor $180,000

Variable manufacturing overhead $135,000

Sales totaled $840,000 for the year, variable selling expenses totaled $60,000, and fixed selling and administrative expenses totaled $180,000 There were no units in the beginning inventory Assume that direct labor is a variable cost

51 The contribution margin per unit would be:

A) $25

B) $39

C) $34

D) $35

Solution:

Unit selling price ($840,000 ÷ 12,000) $70

Less direct materials ($150,000 ÷ 15,000) $10

Less direct labor ($180,000 ÷ 15,000) 12

Less variable manufacturing overhead ($135,000

÷ 15,000) 9

Less variable selling and administrative ($60,000

÷ 12,000) 5 36

Contribution margin $34

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52 Under absorption costing, the carrying value on the balance sheet of the ending

inventory for the year would be:

A) $135,000

B) $93,000

C) $105,000

D) $0

Solution:

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead+ Fixed manufacturing overhead

B) $30,000 higher than under absorption costing

C) $30,000 lower than under absorption costing

D) $42,000 lower than under absorption costing

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Abdi Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $81

Units sold 7,000

Direct labor $30

Fixed costs:

54 What is the unit product cost for the month under variable costing?

A) $77

B) $66

C) $68

D) $57

Solution:

Direct materials + Direct labor + Variable manufacturing overhead

= $20 + $30 + $7 = $57

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55 What is the unit product cost for the month under absorption costing?

A) $66

B) $77

C) $57

D) $68

Solution:

Unit product cost = Direct materials + Direct labor + Variable manufacturing overhead+ Fixed manufacturing overhead = $20 + $30 + $7 + $9 = $66

56 The total contribution margin for the month under the variable costing approach is:A) $91,000

B) $168,000

C) $105,000

D) $25,300

Solution:

Unit selling price $81

Less unit variable costs:

Direct labor 30

Variable manufacturing overhead 7

Variable selling and administrative 11 68

Contribution margin $13

Total contribution margin = $13 × 7,000 = $91,000

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57 The total gross margin for the month under the absorption costing approach is:

A) $105,000

B) $124,800

C) $7,000

D) $91,000

Solution:

Unit fixed manufacturing overhead = $9

Unit product cost under absorption costing = $20 + $30 + $7 + $9 = $66

Solution:

Variable selling and administrative cost + Fixed costs

= ($11 × 7,000) + ($65,700 + $21,000)

= $77,000 + $86,700 = $163,700

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59 What is the total period cost for the month under the absorption costing approach?A) $98,000

B) $65,700

C) $21,000

D) $163,700

Fixed costs:

Fixed manufacturing overhead $ 65,700

Fixed selling and administrative 21,000 86,700

Contribution margin $ 4,300

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61 What is the net operating income for the month under absorption costing?

A) $7,000

B) $4,300

C) $(12,800)

D) $2,700

Solution:

Sales revenue ($81 × 7,000) $567,000

Gross margin 105,000

Selling and administrative expenses:

Variable selling and administrative ($11 ×

7,000) $77,000Fixed selling and administrative 21,000 98,000

Net operating income $ 7,000

Hopkins Company manufactures a single product The following data pertain to the

company's operations last year:

Selling price per unit $24

Production $8

Selling and administration $2

Fixed costs in total:

Production $48,000

Selling and administration $36,000

At the beginning of the year there were no units in inventory A total of 12,000 units were produced during the year, and 10,000 units were sold

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62 Under variable costing, the unit product cost is:

A) $8.00

B) $10.00

C) $12.00

D) $14.00

Solution:

Unit product cost = $8 + $4 = $12

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64 The net operating income under variable costing would be:

A) $64,000

B) $60,000

C) $56,000

D) $52,000

Solution:

Sales revenue ($24 × 10,000) $240,000

Variable costs:

Variable cost of goods sold ($8 × 10,000) $80,000

10,000) 20,000 100,000Contribution margin 140,000

Fixed costs:

65 The net operating income under absorption costing would be:

A) the same as the income under variable costing

B) $8,000 greater than the income under variable costing

C) $12,000 greater than the income under variable costing

D) $8,000 less than the income under variable costing

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Phearsum Corporation manufactures a parachute Shown below is Phearsum's cost structure:

Variable cost perparachute Total fixed costfor the yearManufacturing cost $160 $342,000

Selling and administrative $10 $171,000

In its first year of operations, Phearsum produced and sold 4,000 parachutes The parachutes sold for $310 each

66 If Phearsum would have sold only 3,800 parachutes in its first year, what total amount

of cost would have been assigned to the 200 parachutes in finished goods inventory under the variable costing method?

A) $28,000

B) $32,000

C) $34,000

D) $49,100

Solution:

Unit product cost = $160

Total cost of ending finished goods inventory = $160 × 200 = $32,000

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67 Refer back to the original data How would Phearsum's absorption costing net

operating income been affected in its first year if only 3,800 parachutes were sold instead of 4,000?

A) net operating income would have been $2,350 lower

B) net operating income would have been $10,900 lower

C) net operating income would have been $12,900 lower

D) net operating income would have been $28,000 lower

AICPA FN: Reporting LO: 1,2 Level: Hard

Solution:

Unit fixed manufacturing overhead = $342,000 ÷ 4,000 = $85.50

Unit product cost under absorption costing = $160 + $85.50 = $245.50

Unit gross margin = $310 − $245.50 = $64.50

Cost savings ($10 × 200) $ 2,000

Less: decrease in gross margin ($64.50 × 200) 12,900

Net operating income increase (decrease) ($10,900)

68 Refer back to the original data How would Phearsum's variable costing net operating income been affected in its first year if 4,500 parachutes were produced instead of 4,000 and Phearsum still sold 4,000 parachutes?

A) net operating income would not have been affected

B) net operating income would have been $38,000 higher

C) net operating income would have been $57,000 higher

D) net operating income would have been $75,000 lower

AICPA FN: Reporting LO: 1,2 Level: Medium

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Feery Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $110

Units sold 3,700

Direct labor $34

Fixed costs:

A) $72

B) $90

C) $83

D) $101

Solution:

Direct materials + Direct labor + Variable manufacturing overhead

= $32 + $34 + $6 = $72

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A) $83

B) $90

C) $72

D) $101

Solution:

71 What is the net operating income for the month under variable costing?

A) $1,800

B) $16,700

C) $9,500

D) $18,500

Solution:

Sales revenue ($110 × 3,700) $407,000

Variable costs:

3,700) 40,700 307,100Contribution margin 99,900

Fixed costs:

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72 What is the net operating income for the month under absorption costing?

A) $18,500

B) $1,800

C) $9,500

D) $16,700

Solution:

Sales revenue ($110 × 3,700) $407,000

Gross margin 74,000

Selling and administrative expenses costs:

3,700) $40,700Fixed selling and administrative 14,800 55,500

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Jarbo Company, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price $129

Units sold 3,800

Direct labor $59

Fixed costs:

The company produces the same number of units every month, although the sales in units vary from month to month The company's variable costs per unit and total fixed costs have been constant from month to month

A) $76

B) $103

C) $84

D) $111

Solution:

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A) $84

B) $76

C) $103

D) $111

Solution:

75 What is the net operating income for the month under variable costing?

A) $3,800

B) $24,400

C) $9,200

D) $8,100

Solution:

Sales revenue ($129 × 3,800) $490,200

Variable costs:

Variable selling and administrative ($8 × 3,800) 30,400 319,200

Contribution margin 171,000

Fixed costs:

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