Which of the following is the income statement formula for the absorption costing method?

Activity-based costing systems assume that:

Activities consume overhead costs
Products consume overhead costs
All of these are correct
Overhead costs are insignificant

Which of the following is the correct sequence of the five steps
of implementing and using an activity-based costing system?

Identify measurable cost drivers, assign overhead, identify
overhead cost activities, analyze individual overhead costs in
terms of those cost activities, and use the cost data to make
decisions
Identify overhead cost activities, identify measurable cost
drivers, assign overhead, analyze individual overhead costs in
terms of those cost activities, and use the cost data to make
decisions
Identify overhead cost activities, analyze individual overhead
costs in terms of those cost activities, identify measurable cost
drivers, assign overhead, and use the cost data to make
decisions
Use the cost data to make decisions, analyze individual overhead
costs in terms of those cost activities, identify measurable cost
drivers, assign overhead, and identify overhead cost activities

Which of the following is a management philosophy on increasing
profitability by improving the quality of products and
processes?

Balanced scorecard management
Total quality management
Costs of quality measurement
Process management

Which of the following is the income statement formula for the
absorption costing method?

Sales Revenue – Variable Manufacturing Costs = Contribution
Margin – Fixed Manufacturing Costs = Operating Income
Sales Revenue – Cost of Goods Sold = Gross Margin – All Fixed
Expenses = Operating Income
Sales Revenue – All Variable Costs = Contribution Margin – All
Fixed Expenses = Operating Income
Sales Revenue – Cost of Goods Sold = Gross Margin – Selling and
Administrative Expenses = Operating Income

Which of the following is the income statement formula for the
variable costing method?

Sales Revenue – Cost of Goods Sold = Gross Margin – Selling and
Administrative Expenses = Operating Income
Sales Revenue – Variable Manufacturing Costs = Contribution
Margin – Fixed Manufacturing Costs = Operating Income
Sales Revenue – All Variable Costs = Contribution Margin – All
Fixed Expenses = Operating Income
Sales Revenue – Cost of Goods Sold = Gross Margin – All Fixed
Expenses = Operating Income

Exhibit 20-5
Barron Company manufactured 150,000 units during the year but
only sold 130,000 of these units. At the beginning of the year,
Barron had no beginning finished goods inventory. The following
unit costs were incurred during the year:

Variable manufacturing cost

$3.00

Variable selling cost

$0.50

Fixed manufacturing cost

$4.00

Fixed selling cost ($300,000 total)

$2.00

Refer to Exhibit 20-5. Using absorption costing, what is the
value of Barron’s finished goods inventory at the end of the
year?

$140,000
$120,000
$60,000
$80,000

Refer to Exhibit 20-5. Using variable costing, what is the value
of Barron’s finished goods inventory at the end of the year?

$120,000
$60,000
$140,000
$80,000

Refer to Exhibit 20-5. If Barron Company sold each unit for $13,
what is Barron’s net income for the year using absorption
costing?

$295,000
$335,000
$415,000
$780,000

Refer to Exhibit 20-5. If Barron Company sold each unit for $13,
what is Barron’s net income for the year using variable
costing?

$335,000
$780,000
$295,000
$415,000

Last year, Racine Company’s income under absorption costing was
$15,000 lower than its income under variable costing. The company
had total production costs of $24 per unit, of which $14 was
variable costs. No selling expenses were incurred this year. Racine
sold 25,000 units during the year. How many units were produced
during the year?

25,000
26,500
24,000

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