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Capacity Analysis and Inventory Costing
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Capacity Analysis and Inventory Costing – MCQs
107 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
What term describes the operational capacity that is below the theoretical maximum capacity?
practical capacity
theoretical costing
standard capacity
actual capacity
2.
Under the Variable Costing approach, how are fixed manufacturing overhead costs handled during the accounting period?
As a changing amount
As a constant amount
As a cost per unit
As a period expense
As an asset
3.
What does the denominator represent in the fixed manufacturing cost rate calculation?
Adjusted labor usage
Unmodified labor usage
Material usage
Capacity utilization
4.
Which of the following is used to determine product capacity, cost analysis, performance assessment, and compliance with regulations?
denominator level choices
numerator level choices
normal level choices
standard level choices
5.
In absorption costing, which format does the income statement typically use?
Inventory profit
Revenue margin
Gross profit
Manufacturing margin
Operating margin
6.
Under absorption costing, the contribution margin per unit along with fixed manufacturing and operating expenses are influenced by which of the following?
profit threshold
break-even point
output level
cost threshold
sales volume
7.
What term describes the budgeted fixed manufacturing cost allocated per unit, used to assess the cost of providing capacity?
overhead labor
capacity
materials cost
direct workforce
8.
What is the method called where over-allocated and under-allocated amounts are distributed to the ending balance of finished goods inventory?
distribution method
unmodified approach
proration method
corrected approach
allocation technique
9.
What is the term used to describe the extent to which a business uses its capacity to meet the average customer demand during the current budget period?
master budget capacity utilization
limited cost usage
unlimited cost usage
unrestricted budget capacity usage
10.
Which method involves restating amounts in the general ledger using actual cost rates?
cost approach without adjustments
adjusted allocation rate method
allocation approach without adjustment
cost approach with adjustments
none of the above
11.
The fixed rate for calculation is determined by which of the following?
utilized capacity
available capacity
capacity utilization rate
declining demand
none of the above
12.
Given a target operating income of $38,000 and a contribution margin of $400 per unit, how many units need to be sold to achieve the desired operating income?
65 units
75 units
95 units
85 units
13.
When production is below sales volume, how is operating income reported under absorption costing?
increased profit
no dividends declared
loss in income
reduced profit
14.
Which method for selecting capacity level assumes there is no initial inventory?
write off variance method
write in variance method
adjusted variance method
unadjusted variance method
15.
In absorption costing, which factors influence the cost-volume-profit relationship?
Production quantity per unit
Sales volume per unit
Selected denominator level
All of the above
None of the above
16.
Given a beginning inventory of $40,000, total sales of $225,000, and an ending inventory of $30,000, what is the total production amount?
$95,000
$235,000
$295,000
$195,000
17.
Under variable costing, what factor solely influences the variation in operating income?
number of units sold
number of units produced
rise in units sold
fall in units sold
change in production costs
18.
In absorption costing, to which period is the fixed manufacturing overhead cost postponed?
current period
subsequent period
annual period
monthly cycle
quarterly period
19.
When production exceeds sales, how does operating income under variable costing compare?
operating income is negative
operating income decreases
operating income increases
dividends are zero
operating income remains unchanged
20.
In manufacturing firms, which costing methods are applied specifically to the valuation of __________?
liabilities accounting
valuation of current assets
machinery cost calculation
inventory costing
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