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Chapter 12 Extra MC Solution

James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Chapter 12 | MAAW's Textbook Table of Contents

1. The major behavioral problem associated with absorption costing is that

b. fixed overhead allocations motivate managers to overproduce.

2. The major behavioral problem associated with direct or variable costing is

d. managers may have a tendency to ignore fixed costs.

3. When a firm uses absorption costing it may find that

c. increased output and decreased sales results in increased profits.

4. Which of the following statements is true with regard to direct costing?

e. a. and d.

5. The difference between absorption costing and variable (direct) costing is that

a. fixed manufacturing costs are capitalized in absorption costing, but not in variable costing.

Sam’s Toy Factory produces a small toy wagon. Sam’s results for the year are as follows:

6. Sam’s net income before taxes based on variable costing is

b. 240,000

7. Sam’s net income before taxes based on absorption costing is

c. 256,000

8. Sam’s net income before taxes based on throughput costing is

a. 216,000

9. What is Sam’s contribution margin?

c. 360,000

10. The conventional linear break-even unit sales is

b. 12,000

11. The break-even unit sales based on variable costing is

b. 12,000

12. The break-even unit sales based on absorption costing is

a. 4,000

13. The break-even unit sales based on throughput costing is

b. 12,000

Now assume Sam company’s results for year two are the same as above except 44,000 wagons are sold and 36,000 wagons are produced.

14. Sam’s net income before taxes based on variable costing for the year 2 is

b. 320,000

15. Sam’s net income before taxes based on absorption costing for the year 2 is

a. 304,000

16. Sam’s net income before taxes based on throughput costing for the year 2 is

d. 344,000

Chapter 12 Extra MC Questions