What types of costs are customarily included in the
cost of manufactured products under (a) the absorp-
tion costing concept and (b) the variable costing
2. Which type of manufacturing cost (direct materials,
direct labor, variable factory overhead, fixed fac-
tory overhead) is included in the cost of goods
manufactured under the absorption costing con-
cept but is excluded from the cost of goods manu-
factured under the variable costing concept?
3. Which of the following costs would be included in the
cost of a manufactured product according to the vari-
able costing concept: (a) rent on factory building, (b)
direct materials, (c) property taxes on factory building,
(d) electricity purchased to operate factory equipment,
(e) salary of factory supervisor, (f) depreciation on
factory building, (g) direct labor?
4. In the variable costing income statement, how are the
fixed manufacturing costs reported, and how are the
fixed selling and administrative expenses reported?
Discuss factors affecting sales process
5. Since all costs of operating a business are control-
lable, what is the significance of the term noncon-
6. Discuss how financial data prepared on the basis
of variable costing can assist management in the
development of short-run pricing policies.
7. Why might management analyze product profitability?
8. Explain why rewarding sales personnel on the
basis of total sales might not be in the best interests
of a business whose goal is to maximize profits.
9. Discuss the two factors affecting both sales and
variable costs to which a change in contribution
margin can be attributed.
10. How is the quantity factor for an increase or a
decrease in the amount of sales computed in using
contribution margin analysis?
11. How is the unit cost factor for an increase or a de-
crease in the amount of variable cost of goods sold
computed in using contribution margin analysis?