Which of the following statements explains a difference between absorption cost plus pricing and variable cost plus pricing?

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What is the difference between absorption and variable cost pricing?
Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods?
What is the difference between absorption costing and variable costing quizlet?
Why is there a difference between absorption and variable costing?

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Question	Answer
Which of the following statements is correct with respect to fixed costs per unit?	They will increase as production decreases
Which of the following describes variable costs?	- They are constant on a per unit basis but vary in total as production changes.
Which of the following is a characteristic of a variable cost?	- Variable costs vary in total with production and sales
On a CVP graph, the intersection of the sales line and the total cost line is known as the:	breakeven point
Which of the following statements is incorrect with respect to total variable costs, within the relevant range?	- They will decrease as production decreases
Which of the following is not a fixed cost?	fixed costs
Which of the following statements is correct with respect to variable cost per unit, within the relevant range?	They will remain the same as production levels change
On a CVP graph, what does the horizontal line intersecting the dollar axis at the level of total cost represent?	Total fixed costs
Which of the following is a characteristic of a contribution margin income statement?	- When variable costs are less than sales revenue, there is a positive contribution margin
Which of the following costs changes in direct proportion to a change in volume?	total variable cost
In a CVP graph, what does the line which begins at the lower left corner represent?	total sales revenue
Which of the following is an underlying assumption of the cost-volume-profit graph?	volume is the only cost-driver
Which of the following is correct with respect to total fixed costs, within the relevant range?	they will remain the same as production levels change
contribution margin	sales revenue minus variable expenses
True/False: Sensitivity analysis is a “what if” technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.	true
True/False: The breakeven point represents the minimum number of units a company must sell before it earns a profit.	false
True/False: When a company produces more units than it sells, absorption costing income will exceed variable costing income.	true
True/False: On a CVP graph, the vertical distance between the total expense line and the total sales revenue line equals the operating income or loss.	true
True/False: CVP analysis assumes that the only factor that affects costs is change in volume.	false
True/False: If all other fathers are constant, an increase in fixed cost will increase the breakeven point.	true
True/False: If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60.	true
True/False: Both the income statement approach and the contribution margin approach may be used for CVP analysis.	true
True/False: A method used to separate mixed costs into fixed and variable components is called the high-low method.	true
True/False: Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.	true
True/False: The margin of safety is $500,000 when actual sales are $1,200,000 and the breakeven point in sales is $700,000.	true
True/False: Fixed costs per unit decrease as production levels decrease.	false
True/False: On a CVP graph, the increase in the operating income as the sales volume increases is equal to the additional contribution margin that is created by the sale of additional units.	true
True/False: The total manufacturing cost per unit increases as total production volume increases.	false
True/False: Total variable costs change in response to changes in the volume of production.	true
True/False: The absorption costing approach considers fixed manufacturing costs to be product costs.	true
True/False: Absorption costing net income can be manipulated by management of inventory levels.	true
True/False: The breakeven point on a CVP graph is the point where the sales revenue line intersects the total cost line.	true
True/False: The variable cost per unit is assumed to be constant within a particular relevant range of activity.	true
True/False: To calculate the weighted-average contribution margin, multiply the sum of the individual product contribution margins by the total number of all units sold.	false
True/False: When additional units are sold, the change in operating income is equal to the change in contribution margin.	true
True/False: To find the number of units that must be sold to achieve a desired operating income, total fixed expenses plus the desired operating income are divided by the contribution margin ratio.	false
True/False: If fixed expenses increase, both the breakeven point and the margin of safety increase.	false
True/False: Fixed costs divided by the contribution margin per unit equals the breakeven point in unit sales.	true
True/False: The mixed cost per unit is constant throughout the relevant range of activity.	false
True/False: If unit sales prices, unit variable costs, and total fixed costs remain the same, but the sales mix changes toward the product with the highest contribution margin ratio, the breakeven point will increase.	false
A 15% increase in production will result in:	a 15% increase in total production costs
If the sales price per unit decreases and the variable costs remain the same, what will be the effect on the contribution margin ratio?	it will decrease
What impact would an increase in fixed costs have on the contribution margin, the margin of safety, and the breakeven point?	no effect, decrease, increase
Which of the following properly describes the difference between absorption costing and variable costing?	- Fixed manufacturing costs are treated as product costs under absorption costing and as period costs under variable costing.
Which of the following statements is correct if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant?	breakeven point decreases
Which of the following would explain why the margin of safety in dollars increased even though total sales dollars did not change?	sales price per unit increased
Which of the following statements is correct if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?	breakeven point increases
If production exceeds units sold, which of the following statements is correct?	- A higher operating income will result under an absorption costing income statement.
True/False: - The breakeven point decreases and the margin of safety increases when the variable cost per unit increases.	FAlse
Which of the following statements is correct if both fixed expenses and sale price increase while variable costs per unit are unchanged?	- The breakeven point could increase, decrease, or remain the same
A decrease in inventory will cause which of the following when comparing operating income under absorption and variable costing?	A higher operating income under variable costing
Which of the following will decrease the breakeven point assuming no other changes in the cost-volume-profit relationship?	increase in the sales price per unit
Which of the following will result in an increase in the breakeven point, a decrease in the margin of safety, and a decrease in the contribution margin per unit?	An increase in the unit cost of direct materials
True/False: The mixed cost per unit is constant throughout the relevant range of activity.	False
Which of the following changes would normally increase the contribution margin per unit the most?	increase in the sales price per unit
The manager of which of the following responsibility centers is responsible primarily for controlling expenses?	cost center
What do we call the practice of directing executive attention to important deviations from budgeted amounts?	management by exception
Which of the following is prepared as the final step in the preparation of the financial budget?	budgeted statement of cash flow
Which of the following managers is usually at the highest level of the organization?	investment center manager
Which of the following is a responsibility center whose success is measured not only by its income, but also by relating income to its invested capital?	investment center
Hogan’s management has forcasted sales of 50,000 units and an increase in finished goods of 10,000 units for the upcoming year. How many units is Hogan planning to produce next year?	60,000
Which of the following budgets or financial statements is an operating budget?	sales budget
Which of the following statements regarding the budgeting process is correct?	- The budget should be designed from the bottom up, with input from employees at all levels.
XYZ Company budgeted $4 million for customer service costs, but actually spent only $3 million. Which of the following statements indicates the best course of action for management to take?	- Management will investigate this $1 million favorable variance to ensure that the cost savings do not reflect skimping on customer service.
Which of the following is not considered when preparing the cash budget?	depreciation expense
The starting point in the budgeting process is the:	preparation of the sales budget
Which of the following is not a responsibility center?	equity center
True/False: The production budget must be prepared before any other component of the operating budget.	false
True/False: Budgeted cash collections and payments are independent of budgeted revenues and expenses.	false
True/False: A goal of the budgeting process is to assist managers with coordinating and implementing the business plan.	true
True/False: Responsibility accounting is designed to evaluate the performance of each responsibility center and its manager.	true
True/False: Budgets provide benchmarks that help managers evaluate performance.	true
True/False: The budgeted cash collections for the current month typically take into consideration collections pertaining to credit sales of prior months.	true
True/False: The master budget is the set of budgeted financial statements and supporting schedules for the entire organization.	true
True/False: The master budget includes the operating budget, the capital expenditures budget, and the financial budget.	true
True/False: The cash budget impacts both the budgeted balance sheet and budgeted statement of cash flows.	true
True/False: A goal of the budgeting process is to communicate a consistent set of plans throughout the company.	true
True/False: Budgeted finished goods inventory will increase when budgeted sales are greater than budgeted production.	false
True/False: Responsibility accounting performance reports compare budgets with actual results for each responsibility center.	true
True/False: Management must get employees to accept the budget’s goals in order to effectively use the budget as a benchmark for evaluating performance.	true
True/False: Budgeting is a technique which is used to plan for future cash inflows and outflows.	true
True/False: Budgeted cash operating expenses include depreciation expense.	false
True/False: An investment center is a responsibility center in which a manager is accountable for maximizing only operating income.	false
True/False: The starting point of a budget process is to predict operating income for the upcoming period.	false
True/False: Budgeted operating expenses for the current year include the expiration of insurance that was paid in a previous period.	true
Cost of goods sold =	Beginning inventory + Purchases + Freight In - Ending Inventory
Factory overhead =	indirect labor + indirect materials + utilities + supplies + janitorial costs + equipment depreciation
Total manufacturing costs =	Beginning inventory + cost of goods manufactured
True/False: Management accounting's financial reports are restricted by GAAP.	false
Manufacturing overhead would be classfied as	product cost and indirect cost
period costs =	operating expenses
True/False: Managerial and financial accounting both use the accrual method	True
True/False: Manufacturing overhead includes all manufacturing costs such as direct labor and direct materials	False
True/False: Manufacturing overhead includes indirect costs such as insurance and depreciation on the factory building	True
Cost of goods manufactured includes direct materials, direct labor, and manufacturing overhead	True
Management accounting is influenced significantly by the Securities Exchange Commission	false
True/False: Management accountants should never disclose confidential information acquired in the course of their work	False
True/False: Total manufacturing costs to account for during the year minus the beginning work in process equals cost of goods manufactured	false
True/False: An increase in the work in process account during the year means that cost of goods manufactured was greater than the manufacturing costs incurred during the year	False
True/False: Period costs, such as direct materials, are expensed during the period they were incurred	false
Period costs do not include what?	factory janitorial costs
Inventory accounts for a manufacturer include what?	materials, work in process, and finished goods
True/False: Both management and financial accounting use the accrual basis to record transactions	true
What best defines direct materials?	used to determine total inventoriable product costs
A merchandiser's purchases are equivalent to what for a manufacturer?	costs of goods manufactured
corporate headquarter's property taxes	are period costs and are expensed as incurred

What is the difference between absorption and variable cost pricing?

Absorption costing entails allocating fixed overhead costs to all units produced for an accounting period. Variable costing includes all of the variable direct costs in COGS but excludes direct, fixed overhead costs.

Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods?

Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods? When production is greater than sales, absorption costing income is greater than variable costing income.

What is the difference between absorption costing and variable costing quizlet?

What is the difference between full absorption costing and variable costing? In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.

Why is there a difference between absorption and variable costing?

Absorption costing differs from variable costing because it allocates fixed overhead costs to each unit of a product produced in the period. Absorption costing allocates fixed overhead costs to a product whether or not it was sold in the period.

Activity based costing Absorption costing example

Which of the following statements explains a difference between absorption cost plus pricing and variable cost plus pricing?

What is the difference between absorption and variable cost pricing?

Which of the following statements is correct regarding the difference between the absorption costing and variable costing methods?

What is the difference between absorption costing and variable costing quizlet?

Why is there a difference between absorption and variable costing?

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