Chapter 5 A 202

Frames, Inc. manufactures large wooden picture frames. Each frame requires $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame produced, and variable selling and administrative expense is $13 per frame sold. The company produces 5,000 units each month and total fixed manufacturing overhead cost per month is $15,000. The unit product cost of each frame using variable costing is $_____.

$68 Variable Costing Unit Product Cost=Direct materials + Direct Labor + Variable Manufacturing overhead = $19+$40+$9 = $68

Pearls! manufactures and sells jewelry. The total variable COGS this month is $72,490. Variable selling and administrative 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 this month is:

$79,398 72,490 + ($22 x 314)

What does the segment margin represent? a) The margin available to cover fixed costs b) The margin available after a segment has covered all of its own costs c) The margin remaining after traceable and common fixed costs have been deducted d) The excess of the segment revenue over the segment cost of goods sold

) The margin available after a segment has covered all of its own costs

when a segment is eliminated, a: (2)

1. traceable fixed cost will disappear 2. common fixed cost will remain unchanged

Comfy Cozy Chairs makes and sells rockers. The production of each rocker requires $45 direct material and 37 of direct labor. Variable manufacturing overhead amounts to 8 per unit, fixed manufacturing overhead totals 58000. What is the product cost using absorption?

119 (45+37+8) + (58000/2000)=119

Variable and Fixed cost distinctions are ignored when a company prepares income statements using?

Absorption costing

A part or activity of an organization about which managers would like cost, revenue, or profit data. (p. 3)

Segment

Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as ____ costs:

period

direct costing or marginal costing are other terms for ______ costing

variable

Costs are separated between variable and fixed expenses when using ___ costing, whereas ___ costing separates costs between product and period

variable, absorption