Question

Amos Rubber company manufactures tires. They reported the following information from their operations last period:

Cost of Direct Materials used in production:	$35,000
Cost of Direct Labor wages:	$40,000
Variable Manufacturing Overhead:	$30,000
Fixed Manufacturing Overhead:	$75,000
Total units produced and sold:	50,000

Under absorption costing, the per-unit cost is greater than the variable per-unit cost by how much?

a. $1.50

b. $2.10

c. $2.75

d. $3.10

Wilcher’s construction company reported the following information from their operations last year:

Direct Labor:	5,000 hours @ $20/hr
Production Manager Salary:	$60,000
Fixed Factory Rent:	$5,000 per month
Equipment maintenance (Variable Expense):	$1,500 per month
Equipment depreciation:	$40,000
Absorption Income:	$1,200,000

Production equaled sales for the period. What would income be under variable costing?

a. $1,200,000

b. $1,360,000

c. $1,040,000

d. We don’t have enough information to determine income under variable costing

Wilcher’s construction reported the following information for their operations last year.

Direct Labor:	5,000 hours @ $20/hr
Production Manager Salary:	$60,000
Fixed Factory Rent:	$5,000 per month
Equipment maintenance (Variable Expense):	$1,500 per month
Equipment depreciation:	$40,000
Administrative Expenses:	$75,000
Total Revenue:	$1,200,000

Production equaled sales for the period. What would income be under variable costing?

a. $847,000

b. $922,000

c. $940,000

d. We don’t have enough information to determine income under variable costing

When will variable and absorption costing produce the same operating income?

a. When production is greater than sales

b. When production is less than sales

c. When production equals sales

d. They will never produce the same operating income

Answer 1