60.1K

Verified Solution

Link Copied!

Diego Company manufactures one product that is sold for $80 per unit in two geographic regionsthe East and West regions. The following information pertains to the companys first year of operations in which it produced 40,000 units and sold 35,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	24
Direct labor	$	14
Variable manufacturing overhead	$	2
Variable selling and administrative	$	4
Fixed costs per year:
Fixed manufacturing overhead	$	800,000
Fixed selling and administrative expense	$	496,000

The company sold 25,000 units in the East region and 10,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $96,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product

A) What is the unit product cost under variable costing?

Group of answer choices

$60

$44

$40

$74

B) What is the unit product cost under absorption costing?

Group of answer choices

$44

$40

$60

$74

C) If the company produces 5,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?

Group of answer choices

Lower

Higher

2) Which method will produce the highest values for work in process and finished goods inventories?

A) Absorption Costing

B) Variable Costing

C) It depends . . .

D) They produce the same values for these inventories

Question3

Variable Costing product costs include direct material, direct labor, variable manufacturing overhead, and variable selling and administrative expenses.

Group of answer choices

True

False

Question 4

If there is no beginning inventory and no ending inventory, the net operating income will be the same under absorption costing and variable costing.

Group of answer choices

True

False

Question 5

Common fixed costs should be allocated to segments when deciding whether a segment should be dropped/discontinued.

Group of answer choices

True

False

Answer & Explanation Solved by verified expert

See Answer