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Print these pages. Answer each of the following questions, explaining your answers or showing
your work, as appropriate, and then compare your solutions to those provided at the end of the
practice exam.
1. Describe the major advantages of the variable costing method.
3. Vosges Candy Company produces handmade candies. The candies sell for $12 per box.
During its first year of operations, the company produced 10,000 boxes of candies and sold
9,000 boxes of the candies. The companys cost information includes the following:
Direct materials
Direct labor
Variable manufacturing overhead
Variable selling and administrative expenses
Fixed manufacturing overhead
Fixed selling and administrative expenses
Part (a) Compute the unit product cost under absorption costing.
Part (b) Compute the unit product cost under variable costing.
Part (e) Explain the difference in the net operating income determined under the absorption
and variable costing methods.
$2.00
3.00
1.00
2.00
$8.00
$2.00
3.00
1.00
$6.00
$108,000
$
80,000
(8,000)
72,000
36,000
32,000
$ 4,000
$108,000
54,000
27,000
27,000
20,000
5,000
25,000
$ 2,000