ACC 208 - Chapter 5 LS

When preparing a segment income statement using the contribution format...

-COGS consists of only variable manufacturing costs -Variable and fixed costs are listed in separate sections of the statement

Common mistakes made by companies when assigning costs to segments include...

-Inappropriately assigning traceable fixed costs -Arbitrarily allocating common fixed costs -Omitting costs that should be included

Discontinuing a profitable segment results in...

-The loss of the segment's revenues -A reduction in the overall profits of the company

When a segment is eliminated, a...

-Traceable fixed cost will disappear -Common fixed cost will remain unchanged

Which of the following statements is correct regarding segmented reporting?

Traceable fixed costs are charged to segments, but common fixed costs are not

The salary of each plant manager is a...

Traceable fixed costs to the plant and a common fixed cost for the individual product lines made in the plant

T/F: It is always easy to determine whether a cost should be classified as traceable or common

False

When should a segment be discontinued?

-When the segment margin is negative -When the segment contribution margin doesn't cover the traceable fixed costs

The use of _____ costing can lead to the omission of segment costs because nonmanufacturing costs are not included as costs of a product.

Absorption

For external reporting purposes, manufacturing companies generally prepare _____ costing income statements, but _____ costing is often used for internal reporting purposed

Absorption, varibale

A fixed cost that supports the operations of more than one segment, but is not traceable in whole or part to any segment is a(n) _____ fixed cost.

Common

If a segment is eliminated, _____ fixed costs are not traced to the segment will not change

Common

An example of traceable fixed cost for General Motors' Corvette Division is the...

Depreciation cost on the equipment used to manufacture the Corvettes

A segment's contribution margin...

Is useful for decisions impacting temporary uses of capacity

When a segment cannot cover its own costs, that segment should...

Probably be dropped

A company's operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known as ______.

Segments