Question

Which of the following is not an example of a nonvalue-added activity?

	a.	Storing
	b.	Reporting defects
	c.	Handling customer complaints
	d.	Supervising production workers

The primary difference between variable and absorption costing is the treatment of:

		fixed selling and administration costs
		variable selling and administrative costs
		fixed manufacturing overhead
		variable manufacturing overhead

The following information was extracted from the accounting records of MVP Corporation:

Selling price per unit	$ 60
Variable cost per unit	20
Total fixed costs	480,000

Required:

A.	What is MVP's break-even point in units?
B.	How many units must be sold to earn operating income of $80,000?
C.	What is MVP's break-even point in units if the selling price increases by 20% and the variable costs decrease by 20%?
D.	Using the information in part C, what sales level in dollars is needed to earn an operating income of $80,000?

Answer 1

(1)

OPTION D: supervising production workers

EXPLANATION:

supervising production workers is an value added activity because it aims at ensuring the the quality of work maintained by the workers which results in improvement in product/services quality.

(2)

OPTION D: fixed manufacturing overhead

EXPLANATION:

under absorption costing, fixed manufacturing overhead is treated as part of the product cost whereas under variable costing it is treated as part of period cost.