Practice Exam
Practice Exam
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1
The Barley Company produces chocolate candies. Their cost information includes the following:
 Annual production 10,000 units Variable costs per unit: Direct materials \$ 2.00 Direct labour \$ 3.00 Variable manufacturing overhead \$ 1.00 Variable selling and admin. expenses \$ 3.00 Fixed costs: Fixed manufacturing overhead \$20,000 Fixed selling and admin. expenses \$ 5,00

The chocolates sell for \$12.00 per box. Assuming the company sells 9000 boxes of the candies, compute the unit product cost under absorption and variable costing, and prepare an income statement under both methods.
2
In the Barley problem above, explain the difference of \$2,000 in the net operating income determined under the absorption and variable costing methods.
3
X Corp Inc. produces and sells a single product for \$12 per unit. Variable manufacturing costs amount to \$4 per unit. Variable selling costs amount to \$1 per unit. Fixed selling costs total \$5,000 per year. Budgeted overhead costs amount to \$50,000 per year, based on a practical capacity of 25,000 units. X Corp produced 25,000 units in each of years 1 and 2. The company sold 15,000 and 27,000 units in Years 1 and 2 respectively. What is X Corp’s net income for Year 1 under the Absorption Method?
4
Describe the major advantages of the absorption and variable cost methods
5
X Corp Inc. produces and sells a single product for \$12 per unit. Variable manufacturing costs amount to \$4 per unit. Variable selling costs amount to \$1 per unit. Fixed selling costs total \$5,000 per year. Budgeted overhead costs amount to \$50,000 per year, based on a practical capacity of 25,000 units. X Corp produced 25,000 units in each of years 1 and 2. The company sold 15,000 and 27,000 units in Years 1 and 2 respectively. What is X Corp’s net income for Year 1 under the Absorption Method?
6
X Corp Inc. produces and sells a single product for \$12 per unit. Variable manufacturing costs amount to \$4 per unit. Variable selling costs amount to \$1 per unit. Fixed selling costs total \$5,000 per year. Budgeted overhead costs amount to \$50,000 per year, based on a practical capacity of 25,000 units. X Corp produced 25,000 units in each of years 1 and 2. The company sold 15,000 and 27,000 units in Years 1 and 2 respectively. What is X Corp’s net income for Year 1 under the Variable Costing Method?
7
X Corp Inc. produces and sells a single product for \$12 per unit. Variable manufacturing costs amount to \$4 per unit. Variable selling costs amount to \$1 per unit. Fixed selling costs total \$5,000 per year. Budgeted overhead costs amount to \$50,000 per year, based on a practical capacity of 25,000 units. X Corp produced 25,000 units in each of years 1 and 2. The company sold 15,000 and 27,000 units in Years 1 and 2 respectively. What is X Corp’s net income for Year 2 under the Variable Costing Method?