13. Which of the following statements is false? Under variable costing, the inco

Question

13. Which of the following statements is false? Under variable costing, the income statement is prepared using a contribution margin a. approach. b. Under variable costing, an increase in production increases the amount of profit reported on the income statement, even if the additional units are not so cVriable costing is not allowed for external financial reporting, but many companies find c. it useful for internal managerial reports. d. Under variable costing, fixed manufacturing costs are expensed in the period incurred 14. In an income statement segmented by product line, a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be: a. classified as a traceable fixed expense and not allocated. b. allocated to the product lines on the basis of sales dollars c. allocated to the product lines on the basis of segment margitn. d. classified as a common fixed expense and not allocated. 15. Pearl Products Company uses 3 gallons of milk to make 1 carton of ice cream. Pearl Products currently has 30 gallons of milk as beginning inventory and desires to maintain an ending inventory of 15 gallons of milk. If 98 carton of ice cream will be produced, how much milk must be purchased? a. 294 gallons b. 279 gallons c. 309 gallons d. None of the above 16. The following are budgeted data: Production (units) 15,000 16,000 13,000 Salos (unita) April.n17,000 June 15,000 Each unit requires 0.75 hours of direet labor at a cost of $6.50 per hour What is the budgeted cost of direct labor for May? a 573,125 b. $82,875 e $63,375 $78,000

Explanation / Answer

Answer:

13) b. Under variable costing system as the number of units sold increases, the total profits shall increase and it is not based on the production alone.

14) c.

In the income statement which is segmented by a product line a fixed expense that cannot be allocated to product lines on a cost-and-effect basis should be allocated to the product lines on the basis of segment margin. Segment margin shall determine such allocation in this case.

15) b. 279 gallons

16) d. $78,000

(6.5x0.75x16000)

Closing 15 Add: Produced (98x3) 294 Less: Opening 30 Purchases 279

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