Absorption and variable costing

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Category: Absorption and variable costing 1-4

1) When a firm prepares financial reports using variable costing:

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Category: Absorption and variable costing 1-4

2) XYZ Inc. began operations in January. The company produced 20,000 units and sold 18,000 units in its first year of operations. Costs for the year were as follows:

Cost TypeAmount
Fixed Manufacturing Costs$100,000
Variable Manufacturing Costs$90,000
Fixed General and Selling Costs$40,000
Variable General and Selling Costs$36,000

How would the operating income of XYZ Inc. compare between the variable costing and full absorption costing methods?

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Category: Absorption and variable costing 1-4

3) Brax Inc. planned to produce and actually manufactured 300,000 units of its single product in its first year of operations. Variable manufacturing costs were $25 per unit of product. Planned and actual fixed manufacturing costs were $900,000, and the selling and administrative costs totaled $500,000. Brax sold 180,000 units of product at a selling price of $50 per unit.

Brax’s operating income using variable costing is: 

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Category: Absorption and variable costing 1-4

4) ABC Ltd. began operations in January. The company produced 30,000 units and sold 25,000 units in its first year of operations. Costs for the year were as follows:

Cost TypeAmount
Fixed Manufacturing Costs$150,000
Variable Manufacturing Costs$120,000
Fixed General and Selling Costs$60,000
Variable General and Selling Costs$45,000

How would the operating income of ABC Ltd. compare between the variable costing and full absorption costing methods?

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Category: Absorption and variable costing 1-4

5) Alpha Corp. planned to produce and actually manufactured 50,000 units of its single product in its first year of operations. Variable manufacturing costs were $20 per unit of product. Planned and actual fixed manufacturing costs were $200,000, and the selling and administrative costs totaled $150,000. Alpha Corp. sold 40,000 units of product at a selling price of $35 per unit.

Alpha Corp.’s operating income using absorption costing is:

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Category: Absorption and variable costing 1-4

6) Colson Corporation planned to produce and actually manufactured 150,000 units of its single product in its first year of operations. Variable manufacturing costs were $20 per unit of product. Planned and actual fixed manufacturing costs were $500,000, and the selling and administrative costs totaled $300,000. Colson sold 100,000 units of product at a selling price of $35 per unit.

Colson’s operating income using variable costing is: 

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