.

Inventory values calculated using variable costing as opposed to absorption costing

will generally be
a. Less
b. Equal
c. Greater
d. Twice as much

Variable selling expenses are

a. Product costs under variable costing but period costs under absorptions costing
b. Period costs under variable costing but product cost under absorption costing
c. Product costs under both costing methods
d. period costs under both costing methods

Alex Company has a large underapplied overhead balance in the manufacturing

overhead account. This could be explained by:
an unfavorable volume variance, assuming all other variances are zero.
a favorable volume variance, assuming all other variances are zero.
standard hours allowed for the period's output being greater than denominator hours for the
period.
none of these

The most likely strategy to reduce the breakeven point would be to fixed costs and
contribution margin.
increase; increase
decrease; increase
decrease; decrease
increase; decrease

Under variable costing

a. Net income will tend to vary inversely with production changes
b. Net income will always be higher than under absorption costing
c. Inventory costs will always be lower than under absorption costing
d. Net income will tend to move upward and downward in response to changes in levels of
production

What ratio indicates the percentage of each sales dollar that is available to cover fixed
costs and to provide a profit?
Margin of safety ratio
Contribution margin ratio
Costs and expenses ratio
Profit ratio

Which of the following would produce a materials price variance?

an excess quantity of materials used.
an excess number of direct labor-hours worked in completing a job.
shipping materials to the plant by air freight rather than by truck.
breakage of materials in production.

In a certain standard costing system direct labor-hours are used as the base for
applying variable manufacturing overhead costs. The standard direct labor rate is
twice the variable manufacturing overhead rate. Last period the labor efficiency
variance was unfavorable. From this information one can conclude that last period the
variable overhead efficiency variance was:
unfavorable and half the labor efficiency variance.
favorable and half the labor efficiency variance.
unfavorable and twice the labor efficiency variance.
favorable and twice the labor efficiency variance.

Last year, a department's standard costing system reported an unfavorable variable

overhead spending variance and an unfavorable volume variance. The denominator
activity level selected for allocating overhead to the product was based on 80% of
capacity. If 100% of capacity had been selected instead as the denominator level, how
would the reported unfavorable spending and volume variances be affected
respectively?
increase, inchanged
increased , increased
unchanged, increased
unchanged, unchanged

What is the rationale behind treating period costs as current expenses?

a. Period costs are uncontrollable
b. Period costs are immaterial
c. Allocation of period costs is arbitrary at best and could lead to erroneous decisions
d. Period costs will occur whether or not production occurs and so it is improper to allocate these
costs to production and defer a current cost of doing business

3
4
5
6

When production is greater than sales, fixed manufacturing overhead costs are
a. Deferred in inventory under variable costing
b. Deferred in inventory under absorption costing
c. Released from inventory under variable costing
d. Released from inventory under absorption costing

Which is not true? At break-even point,

profit equals zero
gross profit equals operating expenses
contribution margin equals fixed costs
total revenue equals total costs
none of the above.

Which of the following would produce a labor rate variance?

Poor quality materials causing breakage and work interruptions.
Use of persons with high hourly wage rates in tasks that call for low hourly wage rates.
Excessive number of hours worked in completing a job.
An unfavorable variable overhead spending variance.

1
2
3
4
5