BACC222 Final Exam

When inventory decreases, cost of goods sold under absorption costing will generally be ______ cost of goods sold under variable costing.

more than

examples of traceable fixed cost are:

-salary of a product manager -maintenance cost for a building were a product is assembled -liability insurance at a company

examples of a common fixed cost are:

-the salary of the CEO of a company -cost of heating for a grocery store -cost of receptionist salary

T or F: Segment margin is most useful in decisions involving short-run changes in sales volume such as pricing special orders.

False

a traceable fixed cost of a segment is

a fixed cost that is incurred because of the existence of the segment; if the segment did not exist that the fixed cost would not be incurred

a common fixed cost is

a fixed cost that supports the operations of more than one segment, but is not traceable in whole or in part to any one segment.

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

absorption

When the number of units produced equals the number of units sold, ______.

all fixed overhead incurred flows to the income statement under both costing methods

If a segment is eliminated,_______ fixed costs that are not traced to the segment will not change.

common

example of a traceable variable cost

direct materials used in the production of an item

Net operating income under absorption costing is generally ______ net operating income under variable costing in periods in which inventory increases.

higher than

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

increase

A traceable fixed cost Blank______.

is incurred because of the existence of the segment

to calculate the segment margin ...

segments contribution margin - segments traceable fixed cost

Using variable costing and the contribution approach for internal decision making ______.

supports decision making enables CVP analysis facilitates explaining changes in net income

When there is no change in inventory, net operating income will be ______costing.

the same under both absorption and variable

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

variable