Managerial Accounting Chapter 6
What costing approach is best suited for cost-volume-profit analysis?
Variable
The use of absorption costing for segmented income statements results in ______.
omission of upstream and downstream costs.
When the units produced exceed the units sold, net operating income computed using the absorption costing approach is ______ the net operating income computed using the variable costing approach.
greater than
Break-Even Point
Fixed Expenses/Contribution Margin Ratio
Period Cost
Fixed Manufacturing Overhead, Fixed Selling and Administrative Expenses, Variable selling and Administrative Expenses
Cost of Goods Sold (Absorption)
Sales - Fixed Manufacturing Overhead
Contribution Margin
Sales - Variable Expenses
Which of the following is a common mistake made by companies when assigning costs to segments?
They assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs.
Unit Product Cost
Direct Materials + Direct Labor + Variable Manufacturing Overhead
Product Cost
Direct Labor, Variable Manufacturing Overhead
Max, Inc., has two divisions, South Division and North Division. South Division's sales, contribution margin ratio, and traceable fixed expenses are $500,000, 60%, and $100,000 respectively. What is the segment margin for the South Division?
$200,000
Contribution Margin Ratio
Contribution Margin/Sales
Bovine Corporation has two divisions: televisions and mobile phones. The mobile phone division has a contribution margin of $600,000. The company's common fixed costs and total traceable fixed costs are $100,000 and $500,000 respectively. What is the segment margin of the mobile phone division, assuming the traceable fixed costs of the television division are $300,000?
$400,000
Absorption Costing
(Fixed Manufacturing Overhead/Units Produced) + Unit Product Cost
Absorption costing income statements ignore ________.
Variable and fixed cost distinctions
When the units produced are equal to the units sold, net operating income computed using the absorption costing approach is _______ the net operating income computed using the variable costing approach.
equal to
When units produced are less than units sold, net operating income computed using the absorption costing approach is _____ the net operating income computed using the variable costing approach.
less than
The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________.
Fixed overhead costs
When the number of units produced is greater than the number of units sold, variable costing net operating income will be ________.
less than absorption costing net operating income