Exam 2

When calculating the profit impact of discontinuing a segment, consider _____. the segment's traceable fixed costs the segment's contribution margin common costs allocated to the segment

the segment's traceable fixed costs the segment's contribution margin

Segmented income statements ______. -Are best used to determine which locations are profitable, rather than which product lines are profitable -May be prepared for activities at many levels in a company -May be prepared for the various departments in the company, but not for specific product lines -Should only be used for profit centers

may be prepared for activities at many levels in a company

Which of the following is not found in the financing section of the cash budget? Cash deficiency Repayments Interest Borrowings

Cash Deficiency

The receipts section of the cash budget lists ______. all cash inflows total sales for the period total credit sales all cash inflows, except from financing

All cash inflows, except from financing

The difference in net operating income between absorption costing and variable costing is due to the?

Time when fixed overhead is expensed

Only costs that would disappear over time if a segment disappeared should be treated as ________ fixed costs.

Traceable

Segment contribution margin equals segment revenue minus the ________ expenses for the segment.

Variable

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

Variable

Do variable costing income statements rely on the contribution format?

Yes

Discontinuing a profitable segment results in ______. -a reduction in the overall profits of the company -the loss of the segment's revenues -reduced common fixed costs for the company

a reduction in the overall profits of the company the loss of the segment's revenues

GAAP and IFRS rules: - require segmented financial data to be included in annual reports. - create incentives for companies to use the contribution margin format in segment reporting. -create problems in reconciling internal and external reports. - require that the same method be used for both internal and external segment reporting.

- require segmented financial data be included in annual reports. - create problems in reconciling internal and external reports. - require that the same method be used for both internal and external segment reporting.

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a ______ for the individual product lines made in the plant. common fixed cost for the plant and a traceable fixed cost traceable fixed cost for both the plant and traceable fixed cost to the plant and a common fixed cost common fixed cost for both the plant and

traceable fixed cost to the plant and a common fixed cost

JPL Company has two segments - Retail and Commercial. The Retail segment has a contribution margin ratio of 40% and traceable fixed expenses of $70,000. Commercial has traceable fixed expenses of $50,000 and a contribution margin ratio of 55%. The company also has $30,000 of common fixed expenses. The break-even point in dollar sales for the Retail segment equals ______.

$175,000 (70,000 / 40% = 175,000)

Because nonmanufacturing costs are not included as costs of a product, the use of ___________ costing can lead to the omission of segment costs.

Absorption

The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency, and ________

Financing

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted _________ __________

Income Statement

All costs of production other than direct materials and direct labor are shown on the ____________ _________ budget

Manufacturing Overhead

The _______ __________ consists of a number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals.

Master Budget

The amount of goods for resale to be acquired from suppliers during the period is shown on the__________ __________ budget

Merchandise Purchase

The ending finished goods inventory budget computes the cost of ______ units.

Unsold

To calculate total sales on the sales budget, multiply budgeted sales in units by ______. -budgeted unit sales -sales price per unit -number of units

Sales price per unit

When a segment is eliminated, A _____ - Common fixed cost will remain unchanged -common fixed cost will disappear - Traceable fixed cost will remain unchanged - Traceable fixed cost will disappear

-Common fixed cost will remain unchanged -Traceable fixed cost will disappear

Assigning common fixed costs to segments impacts ______. -segment margin only -both segment margin and total corporate profit -total corporate profit only -neither segment margin nor total corporate profit

Segment Margin Only

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) _________ __________ budget is in place.

Self-Imposed

Budgeted expenses for areas other than manufacturing are shown on the ______ budget.

Selling & administrative

All direct labor and manufacturing overhead is treated as fixed under ______ costing. -absorption -super-variable -variable -super-fixed

Super Variable

A ________ _______ cost of a segment is a fixed cost that is incurred because of the existence of the segment.

Traceable Fixed cost

Common mistakes made by companies when assigning costs to segments include ______. -inappropriately assigning traceable fixed costs -inappropriately allocating variable costs -arbitrarily allocating common fixed costs -omitting costs that should be included

inappropriately assigning traceable fixed costs arbitrarily allocating common fixed costs omitting costs that should be included

Absorption costing is ______. -required by GAAP and IFRS -used by most companies for both internal and external reports -rarely used -the preferred method for internal decision making

required by GAAP and IFRS used by most companies for both internal and external reports

Budgets _______. -Primarily help managers with day-to-day emergencies -Focus on what has happened in the past -Communicate management's plan throughout the organization

-Communicate management's plan throughout the organization.

Using budgeting assumptions when preparing the master budget, ______. -makes it easier to answer "what-if" questions -increases the complexity of the process -involves adjusting data inputs within each master budget schedule

-Makes it easier to answer "what-If" questions

Variable Costing

A costing approach in which only variable manufacturing costs are product costs, and fixed manufacturing costs are period costs (expenses). DM & DL

A detailed plan for the future that is usually expressed in formal quantitative terms is a(n) __________

Budget

Developing goals and preparing various budgets to achieve those goals is part of the ________ process.

Budgeting

Why is CVP analysis more difficult when using absorption costing than when using variable costing?

CVP analysis requires costs to be broken down between variable and fixed which is not done is absorption costing.

One mistake companies make when preparing segmented income statements is arbitrarily assigning _________ fixed costs to segments.

Common

_______ involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

Control

The number of working hours required to satisfy the production budget is shown on the _________ _________ budget

Direct Labor

In a manufacturing company, the ___________ ____________ budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories

Direct Materials

More accurate estimates and higher motivation are generally the result of using a(n) ______ budget. Multiple choice question.

Participative Budget

T or F: Absorption costing is used for external reports.

True

Absorption Costing

A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs.

Fixed manufacturing overhead costs are included as part of Work In Process inventory under________.

Absorption Costing

Which of the following is needed to prepare a sales budget? Desired ending inventory of raw materials The budgeted number of units to be sold Beginning inventory of finished goods Desired ending inventory

The budgeted number of units to be sold

When preparing a segment margin income statement ______. -fixed manufacturing costs are included in cost of goods sold -cost of goods sold consists of only variable manufacturing costs -common fixed expenses are excluded from the statement -traceable fixed expenses are deducted from contribution margin

-cost of goods sold consists of only variable manufacturing costs -traceable fixed expenses are deducted from contribution margin

Budgets ______. -define goals and objectives that can serve as benchmarks for evaluating subsequent performance -and the budgeting process can uncover potential bottlenecks before they occur -coordinate the activities of the entire organization by integrating the plans of its various parts -force managers to think about and plan for the future -provide each department with the same amount of money to spend, so that all departments are treated fairly

-define goals and objectives that can serve as benchmarks for evaluating subsequent performance -and the budgeting process can uncover potential bottlenecks before they occur -coordinate the activities of the entire organization by integrating the plans of its various parts -force managers to think about and plan for the future

SPS Products has two divisions—Catalog Sales and Online Sales. For the last quarter the Catalog Sales segment margin was ($5,000). Online sales were $100,000. Online Sales contribution margin was $60,000, and its segment margin was $40,000. If Catalog Sales are discontinued, it is estimated that online sales will increase by 10%. Discontinuing Catalog Sales should increase company profits by ______. $6,000 $9,000 $5,000 $11,000

11,000 (100,000 x 10% x 60,000 / 100,000 = 6,000 + 5,000 = 11,000)

Croft Corporation produces a single product. Last year, the company had the net operating income of $90,550 using absorption costing and $75,400 using variable costing. The fixed manufacturing overhead cost was $15 per unit. There were no beginning inventories. If 23,900 units were produced last year, then sales last year were:

90,550 = $75,400 + ($15 * Ending Inventory) ($15 * Ending Inventory) = 90,550 - $75,400 Ending Inventory = $15,150 / 15 Ending Inventory = 1,010 Units Sales = Units Produced - Ending Inventory Sales = 23,900 units - 1,010 units Sales = 22,890 units

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _________ _________ from the last year

Balance Sheet

The annual master budget file includes the ______ from last year because it is needed for the schedule of expected cash collections. -balance sheet -income statement -cash budget -sales budget

Balance Sheet

To prepare a budgeted balance sheet as of December 31, 2020, data is needed from the ______ December 31, 2019. statement of cash flows for the year ended balance sheet as of income statement for the year ended

Balance sheet as of

A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules. average end beginning

Beginning

Bart's Inc. operates retail stores in various cities. Segmented income statements are prepared for each store and for each product line in each store. The property tax for the store is a(n) ______ fixed cost for the store, and a(n) _________ fixed cost for each product line sold in the store.

Traceable Common

Segment contribution margin equals segment revenue minus the ________ expenses for the segment

Variable