AC 204 Ch 6

Financial statement users need to be aware of changes in inventory levels when using ________________ costing.

absorption

Costs are categorized by function when using ________________ costing and by behavior when using ___________________ costing.

absorption; variable

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ in total as the number of units produced increases.

increase

The difference in net operating income between absorption costing and variable costing is due to the ______.

time when fixed overhead is expensed

Which of the following statements are correct regarding income statements prepared under variable and absorption costing?

-Reported net income on the statements often differ. -Both income statements include product and period costs.

Why is CVP analysis more difficult when using absorption costing than when using variable costing?

CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing.

When using variable costing, fixed manufacturing overhead is ______.

expensed in the period incurred

Segment contribution margin equals segment revenue minus the ______________ expenses for the segment.

variable

The number of units produced does not affect net operating income when using ______________ costing.

variable

A variable costing income statement ______.

-focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs -calculates contribution margin while the absorption costing income statement calculates gross margin

When preparing a segment margin income statement ______.

-traceable fixed expenses are deducted from contribution margin -cost of goods sold consists of only variable manufacturing costs

Assigning common fixed costs to segments impacts ______.

segment margin only