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Quiz on Income Statement and Cost of Goods Sold

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					                                                      Quiz – Chapter 7
     1. In an income statement prepared as an internal report using the variable costing
        method, variable selling and administrative expenses would:
        A) not be used.
        B) be treated the same as fixed selling and administrative expenses.
        C) be used in the computation of net operating income but not in the
            computation of the contribution margin.
        D) be used in the computation of the contribution margin.

     2. If the number of units produced exceeds the number of units sold, then net
        operating income under absorption costing will:
        A) be equal to the net operating income under variable costing.
        B) be greater than net operating income under variable costing.
        C) be equal to the net operating income under variable costing plus total fixed
             manufacturing costs.
        D) be equal to the net operating income under variable costing less total fixed
             manufacturing costs.

Use the following to answer questions 3-6:

Janos Company, which has only one product, has provided the following data
concerning its most recent month of operations:

Selling price .............................................        $111

Units in beginning inventory ...................                     300
Units produced .........................................           2,000
Units sold .................................................       2,200
Units in ending inventory ........................                   100

Variable costs per unit:
 Direct materials.....................................                  $29
 Direct labor ...........................................                30
 Variable manufacturing overhead .........                                4
 Variable selling and administrative ......                               9

Fixed costs:
  Fixed manufacturing overhead .............                    $34,000
  Fixed selling and administrative...........                    39,600
The company produces the same number of units every month, although the sales in
units vary from month to month. The company's variable costs per unit and total fixed
costs have been constant from month to month.




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     3. What is the unit product cost for the month under variable costing?
        A) $63
        B) $80
        C) $72
        D) $89

     4. What is the unit product cost for the month under absorption costing?
        A) $80
        B) $72
        C) $63
        D) $89

     5. What is the net operating income for the month under variable costing?
        A) $8,800
        B) $12,200
        C) $1,700
        D) $24,800

     6. What is the net operating income for the month under absorption costing?
        A) $8,800
        B) $24,800
        C) $1,700
        D) $12,200


Use the following to answer questions 7-10:

Kosco Corporation's absorption costing income statement for March follows:

                                       Kosco Corporation
                                        Income Statement
                                 For the Month Ended March 31

Sales (2,400 units)....................................................                  $48,000
Cost of goods sold:
 Beginning Inventory (100 units)...........................                    $ 1,000
 Add Cost of Goods Manufactured (2,500 units)...                               25,000
 Goods Available for Sale ......................................               26,000
 Less Ending Inventory (200 units)........................                       2,000
Cost of Goods Sold ..................................................                     24,000
Gross Margin ...........................................................                  24,000
Less Selling and Administrative Expenses:
 Fixed .....................................................................    7,200
 Variable .................................................................     9,600    16,800
Net Operating Income..............................................                       $ 7,200




                                                                    Page 2
During March, the company's variable production costs were $8 per unit and its fixed
manufacturing overhead totaled $5,000.


   7. Net operating income under the variable costing method for March would be:
      A) $7,200.
      B) $7,000.
      C) $7,600.
      D) $6,800.

   8. The contribution margin per unit during March was:
      A) $8.
      B) $12.
      C) $10.
      D) $3.

   9. The break-even point in units for the month under variable costing would be:
      A) 600 units.
      B) 900 units.
      C) 1,017 units.
      D) 1,525 units.

 10. The dollar value of Kosco's ending inventory on March 31 under variable costing
     would be:
     A) $1,600.
     B) $2,400.
     C) $2,000.
     D) $3,400.




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