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ACCOUNTING
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ACCOUNTING
On February 19 of the current year, Quartzite Co. pays $5,400,000 for land estimated to contain 4 million tons of recoverable ore. It installs machinery costing$400,000 that has a 16-year life and no salvage value and is capable of mining the ore deposit in 12 years. The machinery is paid for on March 21, eleven days before mining operations begin. The company removes and sells 254,000 tons of ore during its first nine months of operations ending on December 31. Depreciation of the machinery is in proportion to the mine’s depletion as the machinery will be abandoned after the ore is mined. Prepare entries to record (a) the purchase of the land, (b) the cost and installation of the machinery, (c) the first nine months’ depletion assuming the land has a net salvage value of zero after the ore is mined, and (d) the first nine months’ depreciation on the machinery. Describe both the similarities and differences in amortization, depletion, and depreciation.
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ACCOUNTING
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ACCOUNTING
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Recommended textbook solutions
A variable costing income statement is helpful in performing cost, volume, and profit (CVP) analysis. It is therefore also known as:
Contribution margin income statement
Gross margin income statement
Net operating income statement
Final income statement
Contribution margin income statement
Which of the following statements is true?
The change in production does not
affect net operating income under variable costing system
The change in production does not affect net operating income under absorption costing system
Both of the above statements are true
Both of the above statements are false
The change in production does not affect net operating income under variable costing system
Consider the following information:
Units produced and sold 1,000 units
Direct materials cost $5 per unit
Direct labor cost $4 per unit
Variable manufacturing overhead cost $3 per unit
Fixed manufacturing overhead cost $4,000
Based on above information, the variable cost of goods sold is:
$16,000
$9,000
$5,000
$12,000
$12,000
Under absorption costing, when inventory decreases the fixed manufacturing overhead is:
Deferred in inventory
Added to
inventory
Subtracted from inventory
Released from inventory
Released from inventory
Consider the following information:
Number of units produced 2,000 units
Direct materials cost $8 per unit
Direct labor cost $12 per unit
Variable manufacturing overhead $6 per unit
Fixed manufacturing overhead $8,000
Variable selling and administrative cost $2 per unit
Fixed selling and
administrative cost $6,000
Based on the information, what is the unit product cost under absorption costing system?
$26
$30
$28
$32
$30
Under variable costing system, the unit product cost includes:
Direct materials, direct labor, variable overhead, and fixed overhead
Direct materials, direct labor, and variable overhead
Direct materials, direct labor, and fixed overhead
Direct
materials and direct labor
Direct materials, direct labor, and variable overhead
When inventory increases, the fixed manufacturing overhead is deferred in inventory under:
Variable costing
Absorption costing
Internal costing
External costing
Absorption costing
If the contribution margin is $5,000, variable cost is $4,000, and net operating income is $2,000, what is the fixed cost?
$3,000
$7,000
$1,000
$9,000
$3,000
The inventories do not change under either absorption costing or variable costing when:
Production is more than sales
Production is less than sales
Production is equal to sales
Production is equal to break-even point
Production is equal to sales
Consider the following information:
Net operating income under variable costing $25,000
Increase in inventory during the period 2,000 units
Fixed manufacturing overhead $50,000
Number of units produced during the period 10,000 units
Based on the above information, the net operating income under absorption costing is:
$15,000
$35,000
$75,000
$10,000
$35,000
The reason of difference in net operating income under variable costing and absorption costing is:
Change in selling price
Change in inventory
Change in variable cost
Change in fixed cost
Change in inventory
Absorption costing is also known as:
Change in selling price
Change in inventory
Change in variable cost
Change in fixed cost
Full costing
Variable costing is also known as:
Absorption costing
Activity based costing
Normal costing
Direct/marginal costing
Direct/marginal costing
When inventory decreases, the net operating income under absorption costing is:
Always lower than variable costing
Always higher than variable costing
Always equal to
break-even point
Always equal to variable costing
Always lower than variable costing
A business segment that is responsible for all of its revenues and expenses is known as:
Investment center
Production center
Profit center
Cost center
Profit center
Under absorption costing, the unit product cost includes:
Direct materials, direct labor, variable overhead, and fixed overhead
Direct materials, direct labor, and variable overhead
Direct materials, direct labor, and fixed overhead
Direct materials and direct labor
Direct materials, direct labor, variable overhead, and fixed overhead
The reports generated by variable costing system of a company is mostly used by:
Lenders and creditors
internal
management
government and tax agencies
investors and stockholders
internal management
Consider the following information:
Net operating income under variable costing $50,000
Decrease in inventory during the period 5,000 units
Fixed manufacturing overhead $100,000
Number of units produced during the period 25,000 units
Based on the above information, the net income under absorption
costing is:
$70,000
$50,000
$150,000
$30,000
$30,000
Which of the following is not included while computing unit product cost under variable costing:
Direct labor cost
direct materials cost
fixed manufacturing overhead cost
variable manufacturing overhead cost
fixed manufacturing overhead cost
The reports generated by absorption costing (also known as full costing) is used by:
Creditors
Investors
Government agencies
All of the above
All of the above
If sales revenue is $35,000, fixed cost is $5,000, and net operating income is $10,000, what is the contribution margin?
$30,000
$15,000
$5,000
$25,000
$15,000
If the sales revenue is $5,000, fixed cost is $1,000, and net operating income is $2,000, what is the variable cost?
$8,000
$4,000
$2,000
$6,000
$2,000
Consider the following information:
Opening inventory 25,000 units
Closing inventory 10,000 units
Sales 150,000
Based on the above information, the number of units produced during the period is:
135,000
units
165,000 units
185,000 units
115,000 units
135,000 units
When inventory increases, the net operating income under absorption costing is:
Always equal to variable costing
Always lower than variable costing
Always higher than variable costing
Always equal to the break-even point
Always higher than variable costing
Consider the following information:
Units produced 50,000 units
Units in opening inventory 5,000 units
Units in closing inventory 10,000 units
Based on the above information, what were the total units sold?
55,000 units
35,000 units
45,000 units
65,000 units
45,000 units
A company manufactures 1,000 units of product X per year. The cost data is given below:
Direct
Materials $5 Per Unit
Direct Labor $4 Per Unit
Variable Manufacturing Overhead $3 Per Unit
Fixed Manufacturing Overhead $6,000 Per Year
Based on the above information, the variable cost to manufacture one unit of product X is:
$18
$9
$15
$12
$12