Chapter 6

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

What is the break-even point for the American Division?

$600,000

What is the company's contribution margin for January?

$13,200

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

What is the cost of goods sold for the month of January using the absorption costing method?

$32,000

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. Assuming the traceable fixed costs of the television division are $300,000, what is the segment margin of the mobile phone division?

$400,000

What is the break-even point for the International Division?

$440,000

Assuming the variable costing method is used, what is the total manufacturing costs added to work in process during the month of February?

$52,000

If the company eliminates the Western Division and the Eastern Division sales increase by 10% as a result, how much will the company's net operating income decrease?

$83,700

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

Which of the following costing approaches is best suited for cost-volume-profit analysis?

Variable

Absorption costing income statements ignore ________.

Variable and fixed cost distinctions

When the units produced are equal to the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

Is equal to

When the units produced are less than the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

Is greater than

When the units produced exceed the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

Is less than

Which of the following statements about the segment margin is not true?

The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin

Assuming the absorption costing method is used, what is the total manufacturing costs per unit added to work in process during the month of February?

$92,000

Decide how each cost is treated on an income statement prepared using the variable costing approach. Using the dropdown boxes, indicate whether each cost item is treated as a period cost or product cost.

Direct Labor - Product cost Fixed manufacturing overhead - Period cost Variable manufacturing overhead - Product cost Fixed selling and administrative expenses - Period cost Variable selling and administrative expenses - Period cost