PRACTICE QUIZ 8

1. Which of the following types of costs is a product cost for absorption costing but a period cost for variable costing?
a. Direct materials
b. Total administrative expense
c. Direct labor
d. Fixed factory overhead per unit sold
e. Variable selling expense
2. When production is less than sales volume, income under absorption costing will be ____ income using variable
costing procedures.
a. equal to
b. randomly different than
c. greater than
d. less than
3. What is the primary difference between variable and absorption costing?
a. Inclusion of fixed selling expenses in period costs
b. Inclusion of fixed selling expenses in product costs
c. Inclusion of fixed factory overhead in product costs
d. Inclusion of variable factory overhead in period costs
4.

Refer to Figure 8-1. Assuming that beginning inventory was zero, what is the value of ending inventory under variable
costing?
a. $5,000

b. $3,300
c. $2,500
d. $3,720
e. $7,200
5.

Refer to Figure 8-1. What is operating income for last year under absorption costing?
a. $85,900
b. $111,300
c. $45,000
d. $67,520
6.

Refer to Figure 8-2. What is the unit product cost under absorption costing?
a. $8.20
b. $8.60
c. $10.20

d. $7.20
e. $10.60
7. Answer is D

Refer to Figure 8-2. What is operating income under variable costing?

a. $7,980
b. $11,340
c. $3,540
d. $3,740
e. -$540
8.

Refer to Figure 8-4. What is the value of the ending inventory using the absorption costing method?
a. $600,000
b. $360,000
c. $240,000
d. $420,000
9.

Refer to Figure 8-5. What is the income for Sanders using the variable costing method?
a. $520,000
b. $500,000
c. $420,000
d. $480,000
10.

Refer to Figure 8-8. What is the January ending inventory for Steele Corporation using the variable costing method?
a. $108,000
b. $78,000
c. $260,000
d. $90,000
11.

Refer to Figure 8-8. What is the March ending inventory for Steele Corporation using the variable costing method?
a. $260,000
b. $120,000
c. $15,000
d. $104,000
12.

Refer to Figure 8-9. Absorption costing income would be ____ the variable costing income.
a. $70,000 greater than
b. $50,000 less than
c. $50,000 greater than
d. $70,000 less than
13.

Refer to Figure 8-9. What is the value of ending inventory using the absorption costing method?
a. $250,000
b. $200,000
c. $310,000
d. $390,000
14.

Refer to Figure 8-10. What is the segment margin for Division Y?

a. $240,000
b. $210,000
c. $40,000
d. $310,000
15.

Refer to Figure 8-10. What is the income for Nauman Company?

a. $65,000
b. $300,000
c. $325,000
d. $41,000
16. The inventory cost that can include processing costs, cost of insurance for shipping and unloading is called
a. Carrying cost.
b. Ordering cost.
c. Setup cost.
d. Storing cost.
e. Stockout cost.
Answer is B
17. Carter Company orders 250 units at a time, and places 15 orders per year. Total ordering cost is $1,100 and total
carrying cost is $1,750. Which of the following statements is true?
a. The economic order quantity (EOQ) is 250
b. The economic order quantity (EOQ) is less than 250
c. Total inventory-related cost is lower than it would be at the economic order quantity (EOQ)
d. The economic order quantity (EOQ) is more than 250
e. None of these choices are correct.
Answer is B
18.

Refer to Figure 8-3. Martin has decided to begin ordering 40 units at a time. What is the average annual carrying cost of
Martin's new policy?
a. $80
b. $160
c. $4
d. $60
e. $90

19.

Refer to Figure 8-3. Martin has decided to begin ordering 40 units at a time. What is the average annual ordering cost of
Martin's new policy?
a. $150
b. $125
c. $100
d. $145
e. $190
20.

Refer to Figure 8-3. What is the EOQ for Martin?

a. 20
b. 100
c. 45
d. 30
e. 50