ACC-208 CHAPTER 6
Under variable costing, the cost of a unit of inventory does NOT contain
Fixed manu overhead
Pearls, pearls, Pearls! manufactures and sells jewelry. The total variable cost of goods sold this month is $72,490. Var selling + admin cost is $22 per unit sold. If 350 units are produced and 314 units are sold this month, the total variable cost reported on the income statement for the month is $ ____________
Total variable cost = $72,490(COGS) + $22(per unit sold) x 314 (units produced) = $79,398
Company manufactures baseball gloves. Each glove requires $22 of DM and $18 of DL. Variable manufacturing overhead cost is $7 per unit and fixed manufacturing overhead cost is $19,000 in total. Variable selling + administrative costs are $11 per unit sold and fixed selling and administrative costs are $13200. Last period, 800 gloves were produced, and 585 gloves were sold. The unit product cost using variable costing is:
Unit product cost = $22(DM) + $18(DL) + 7(Var. Manu. Ov) = $47
Direct costing or marginal costing are other terms for______ costing
Variable
Which of the following approaches may be used internally by manufacturing companies for costing products for the purposes of valuing inventory and cost of goods sold?
Variable and Absorption costing
Common mistakes made by companies when assigning costs to segments include:
arbitrarily allocating common fixed costs omitting costs that should be included Inappropriately assigning traceable fixed costs
segment break-even calculations include:
only traceable fixed expenses
Variable costing treats ______ manufacturing costs as product costs.
only variable
When a segment cannot cover its own costs, that segment should:
probably be dropped
The segment margin is a valuable tool for assessing the long-run _______ of a segment
profitability
Absorption costing is:
required by GAAP + IFRS
Construct a contribution format income statement
sales variable exp contribution margin fixed expenses net operating income
Absorption costing
separates product (manufacturing) costs from period ( S + A ) costs
Granny's Touch Manufactures and sells cookbooks. The company's variable cost of goods sold is $39,200 and variable selling and administrative expense is $6,200. Fixed manufacturing overhead is $19,700 and fixed selling + administrative expense is $9,290. An income statement prepared using variable costing shows $_______ as the total fixed expenses.
total fixed expenses = $19,700(Fixed Manu. Ov) + $9,290(Fixed selling + admin) = $29,990
The segment margin ='s the segment's contribution margin less the segment's _________ fixed costs.
traceable
When computing a segment margin, only _______ fixed costs are changed to the particular segment.
traceable
Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. The company produced 1,490 bottles this month and sold 1,203 of those bottles. Total COGS was:
$5.38(unit product cost) x 1,203(sold) = $6,472.14
Product costs under absorption costing are:
DL DM Fixed manu. ov Variable manu. ov
Which of the following costs make up the manufacturing cost per unit of a product under variable costing?
DM DL VMO
When inventory increases, which costing method generally results in higher net operating income?
absorption costing
Fixed manu overhead costs are expressed as units are sold as part of cost of goods sold under __________
absorption costing and variable costing
When using variable costing, fixed manufacturing overhead is:
expensed in the period incurred
When preparing a contribution margin income statement
- COGS consists of only variable manufacturing costs - variable and fixed costs are listed in separate sections of the statement
When should a segment be discontinued?
- When the segment contribution margin doesn't cover the traceable fixed costs - When the segment margin is negative
Bart's inc. operates retail stores in various cities. Segmented income statements are prepared for each store and for each product line in each store. The property tax for the store is a(n) traceable fixed cost for the store, and a(n) common fixed cost for each product line sold in the store.
?????
Contrast the way fixed manufacturing overhead costs are treated in absorption costing versus variable costing
Absorption - fixed manufacturing overhead is treated as part of the per unit product cost and expensed as units are sold. Variable costing - fixed manufacturing overhead is treated as a period cost and expensed in full each period
The unit product cost of a blender is $24. If 900 blenders are produced and 849 blenders are sold, the total COGS is $________
COGS = 849(prodced) x $24(unit product cost) =
Under absorption costing, fixed manu ov accumulates in which accounts until units of product are sold?
Inventory on bal sheet
The segment margin represents the:
Margin available after a segment has covered all of its own costs
Construct an income statement using absorption costing
Sales - Total COGS = GM - Total S + A costs = Net Operating income
Variable costing
deducts all variable expenses from sales to determine contribution margin and all fixed expenses from contribution margin to determine income or loss.
the number of units produced does not affect net operating income when using ______ costing
variable