Chapter 6 Learn smart
the segment margin is obtained by deducting the ___ fixed cost of a segment from the segments ____
traceable, CM
Absorption costing (def)
treats all manufactoring costs as product costs
the number of units produced does not affect NOI when using
varible costing
Cost volume profit analysis
we breka down costs of fixed and varible ----> easier to used varible costing
cost of a unit consists of
direct labor/mats and fixed and varible MOH
when using varible costing fixed moh is
expensed in the period incurred
the difference between reported net incoe on varible costing and absorption costing income statements is based on how
fixed oh is accounted for
a company with three segments has 10000 in common fixed expenses. all threee segments are at the break even point as a result the comany
has an overall NO loss of 10000
NOI under absorption costing is generally ____ net op income under varible costing in periods in which inventory increases
higher than
company wide break even sales will always be ___ the sum of the segment break even sales
higher than
Absorption costing
ignores varible and fixed distinctions
Absorption costing can lead managers to mistakenly believe that fixedMOH cost will ___ as the number of units produced increases
increases in total
A traceable fixed cost
is incurred bc of the existence of the segment
when inventory decreases cogs under absorption costing will be ___ cogs under varible costing
more then
Varible costing
only manufactoring costs that vary with output are treated as product costs EX direct mats/labor
Varible costing treats Fixed MOH as a
period cost
Fixed MOH is a
period cost and is reported as an expense each period
Varible fixed MOH is
period cost.. taken immediately to income statement as period expense
when allocatting MOH costs to units under absorption costing the total fixed OH costs must be divided by the number of units
produced
Absorption costing treats fixeed moh as a
product cost
a companies operations can be divided by product lines manufactoring plants which are known as
segments
when there is no change in inventory noi will be
the same under both absorption costing and varible costing
One mistake compaines make when preparing segmented income statements is arbitrarlly assigning ______ to segments
common fixed costs
Varible costing catagorizes expenses based on
cost behavior
segment margin
deducting traceable fixed costs of a segment from the segment's contribution margin
when inventory absorption costing noi is higher than varible costing net income due to the fixed MOH
deferred in the inventory account on the balence sheet
NOI often
differ
absorption costing is
-used by mostcompanies for internal and external reports _required by GAAP and IFRS
common fixed cost
A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments.
COGS does not contain
Fixed OH
units produced exceed units sold
NOI is higher in absorption than varible -bc domr fixed MOH is deffered
when units produced equals units sold
NOI would be the same
The 2 general costing approches used by manufactoring companies to prepare income statements are
Varible and absorption
Costs are seperated between varible and fixed expenses when using _____ costing, whereas ___ costing seperates costs between product and period
Varible, absorption
absorption fixed MOH is included in
WIP to FG only when units are sold do costs flow though income statement as COGS
traceable fixed cost
a fixed cost that is incurred because of the existence of the segment
Fixed MOH cost are expensed as units are sold as part of cogs under ______ costing and expensed in full with period costs under ______ costing
absorption varible
when using absorption costing and explaining changes in operating income fincacial staement users neeed to be aware of changes in
activity levels
allocates a portion of
both fixed and varible costs to each product
