bus 215 ch 6
net income computed under _____ costing may not agree with the results of cvp analysis
absorption
the use of _____ costing can lead to the omission of segment costs because non manufacturing costs are not included as costs of a product
absorption
fixed manufacturing overhead costs are included as part of work in process inventory under
absorption costing
when inventory increases, which costing method generally results in higher net income
absorption costing
costs are categorized by function when using ______ costing and by behavior when using ______ costing
absorption; contribution
fixed manufacturing overhead costs are expensed as units sold as part of cost of goods sold under _____ costing and expensed in full with period costs under ____ costing
absorption; variable
common mistakes made by companies when assigning costs to segments include
arbitrarily allocating common fixed costs, omitting costs that should be included, and inappropriately assigning traceable fixed costs
selling and administrative expenses
are always treated as period costs
a fixed cost that supports the operation of more than one segment, but is not traceable in whole or part to any one segment is a _______ fixed cost
common
variable costing income statements are based upon a ____ format
contribution margin
product costs under absorption costing are
direct materials and labor and variable and fixed manufacturing overhead
when using absorption costing, fixed manufacturing overhead cost per unit = total fixed manufacturing overhead divided by:
units produced
one mistake companies make when preparing segmented income statement is arbitrarily assigning ____ fixed costs to segments
untraceable
direct costing or marginal costing are other terms for
variable costing
the number of units produced does not affect net operating income when using
variable costing
for external reporting, income statements are generally prepared using _____ costing, and ______ costing is used for internal decision making purposes
variable; absorption
variable costing net income may be computed by multiplying the number of units sold by the ______ ______ per unit and subtracting total ______ expenses
contribution margin; fixed
net operating income is less under absorption costing than under variable costing when inventory for the period
decreases
incorrectly or arbitrarily assigning common costs to segments
distorts the profitability of segments, could reduce the overall profits of the company, and holds managers responsible for costs they cannot control
using variable costing and the contribution approach for internal decision making
enables cvp analysis, facilitates explaining changes in net income, and supports decision making
on an absorption costing income statement, selling and administrative expenses:
equal the amounts reported on a variable costing income statement; are reported as a single amount
when a segment is eliminated, a
fixed cost will disappear
a variable costing income statement
focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs; and calculates contribution margin while the absorption costing income statement calculates gross margin
when units sold exceeded units produced, net income under variable costing will generally be _____ net income under absorption costing
higher than
absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ as the number of units produced increases
increase in total
a. traceable fixed cost
is incurred because of the existence of the segment
the segment margin represents the
margin available after a segment has covered all of its own costs
when inventory decreases, cost of goods sold under absorption costing will be ________ cost of goods sold under variable costing
more than
costs should be allocated to segments for internal decision making purposes
only when the allocation base actually drives the cost being allocated
a segment cannot cover its own costs, that segment should
probably be dropped
contribution format income statement
sales variable expenses contribution margin fixed expenses net operating income
from a decision point of view, ________ margin is most useful for majority capacity decisions and ______ margin is most useful for short term sales volume decisions
segment; contribution
a companys operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known as ______
segments
costs that can be traced directly to a segment
should not be allocated to other segments
absorption costing and variable costing net operating income will be equal when
the number of units produced equals the number of units sold and there is no beginning and no ending inventory
when there is no change in inventory, net operating income will be
the same under both absorption costing and variable costing
differences in net operating income between absorption costing and variable costing is due to the:
timing of when fixed manufacturing overhead is expensed