230 Exam 3
True statements about segment margins
-in preparing a segmented income statement, the variable expenses are deducted from sales to yield the contribution margin for each segment. - the segment margin represents the margin available after a segment has covered all of its own costs. -the segment margin is the best gauge of the long-run profitability of a segment because it includes only those costs that are caused by the segment.
desired ending raw materials inventory for the last period
In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________
fixed overhead costs
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_______
product cost
direct labor
period cost
fixed selling and administrative expenses
product cost
variable manufacturing overhead
period cost
variable selling and administrative expenses
period cost
fixed manufacturing overhead
Sales minus variable cost
Contribution Margin equals
beginning inventory for the first quarter
For a production budget, the ________ is the beginning inventory for the year
decrease
A shift in the sales mix form high-margin items to low-margin items can cause total profit to?
variable and fixed cost distinctions
Absorption costing income statements ignore_________
total revenue equals total costs
Break-even point is the level of sales at which_____
avoid labor shortages
Companies prepare direct labor budgets to _______
unit contribution margin
One the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold
Sales
The budgeting process begins with the preparation of the _______ budget
operating leverage
The measure of how sensitive net operating income is to a given percentage change in volume sales is called?
Profit= (Unit CM X Q) - Fixed Expenses
The profit graph is based on the following linear equation:
estimate the quantity of raw materials to be purchased
The purpose of preparing a direct materials budget is to _________
unit product cost
The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the_______
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 Volume
What is represented on the X axis of a cost-volume-profit (CVP) graph?
Fixed expenses
What is usually plotted as a horizontal line on the CVP?
less than absorption costing net operating income
When the number of units produced is greater than the number of units sold, variable costing net operating income will be________
is equal to
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 greater than
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 less 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
Variable
Which of the following costing approaches is best suited for cost-volume-profit analysis?
companies choose a span of one year to correspond to their fiscal years
Which of the following explains why operating budgets generally span a period of one year?
Break-even point, loss area, and profit area
With regards to interpretation, what are the important areas that appear on a CVP graph?
costs of carrying inventory
Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories
Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations
Which of the following is not a benefit of self-imposed budgets?
The budgeting process enables managers to uncover bottlenecks as they occur
Which of the following is not one of the reasons that organizations use budgets?
least-squares regression
Which of the following methods do managers use to estimate the fixed and variable components of mixed costs by analyzing past records of cost and activity data?
