Accounting Exam 2 ch. 6

c. omission of upstream and downstream costs d. under-costing of segments

Using absorption costing for segmented income statements can lead to: (Select all that apply) a. the need to maintain two costing systems b. inconsistencies between internal and external reports c. omission of upstream and downstream costs d. under-costing of segments

true

Variable costing net operating income is usually closer to the net cash flow of a period than is absorption costing net operating income. true/false

a. absorption costing net income is equal to variable net income b. under both absorption and variable, all fixed overhead incurred flows to the income statement

When the number of units produced equals the number of units sold: (Select all that apply) a. absorption costing net income is equal to variable net income b. under both absorption and variable, all fixed overhead incurred flows to the income statement c. absorption total expense is less than variable total expenses d. absorption costing net income is less than variable costing net income

b. higher than

When units sold exceed units produced, net income under variable costing will generally be ___ net income under absorption costing. a. equal to b. higher than c. less than

Inventory

When using absorption costing and explaining changes in operating income, financial statement users need to be aware of the changes in ___ levels.

a. units produced

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead divided by: a. units produced b. units in ending inventory c. units sold d. units produced - units sold

c. may be prepared for activities at many levels in the company

segmented income statements: a. should only be used for profit centers b. may be prepared for the various departments in the company, but not for specific product lines c. may be prepared for activities at many levels in the company d. are best used to determine which locations are profitable, rather than which product lines are profitable

false

Absorption and variable costing always result in the same net operating income each year true/false

common

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

traceable, contribution margin

The segment margin is obtained by deducting the ___ fixed costs of a segment from the segment's ___.

true

A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products. true/false

segment

A part or activity within an organization about which managers would like cost, revenue or profit data is called a ____.

b. has a cm that cannot cover traceable fixed costs c. cannot cover its own costs

A segment should be discontinued when the segment: (Select all that apply) a. has important side effects on other segments b. has a cm that cannot cover traceable fixed costs c. cannot cover its own costs d. has a positive segment margin but cannot cover any common fixed costs

c. is incurred because of the existence of the segment

A traceable fixed cost: a. supports the operations of more than one segment b. would continue if the segment were discontinued c. is incurred because of the existence of the segment d. varies with he activity level in a particular segment

c. increase in total -not b. bc when fixed costs are put on a per unit basis, it appears that the total cost will increase as the number of units increases

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ___ as the number of units produced increases a. remain the same in total b. decrease in total c. increase in total

true

Absorption costing treats all manufacturing costs as product costs. true/false

d. depreciation cost on the equipment used to manufacture the Corvettes -c. is a traceable variable cost

An example of a traceable fixed cost for General Motors' Corvette Division is the: a. utilities cost of the GM corporate HQ b. salary of the chief executive officer c. direct materials used in the production of the corvettes d. depreciation cost on the equipment used to manufacture the Corvettes

traceable, common

Bart's, Inc. operates retail stores in various cities. Segmented incomes statements are prepared for each store and for each product line in each store. The property tax for the store is a ___ fixed cost for the store, and a ___ fixed cost for each product line sold in the store.

d. pricing, drop

Decision-making problems that could occur when using absorption costing include inappropriate ___ decisions, and decisions made to ___ products that are, in fact, profitable. a. strategy, produce b. reporting, add c. production, focus upon d. pricing, drop

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

Discontinuing a profitable segment results in: (Select all that apply) a. the loss of the segment's revenues b. reduced common fixed costs for the company c. a reduction in the overall profits of the company

a. could reduce the overall profits of the company b. holds managers responsible for costs they cannot control d. distorts the profitability of segments -not C bc cost allocation does not impact the net income of the company as a whole.

Incorrectly or arbitrarily assigning common costs to segments: (Select all that apply) a. could reduce the overall profits of the company b. holds managers responsible for costs they cannot control c. causes company net income to be reported incorrectly d. distorts the profitability of segments

a. absorption

Net Income computed under ___ costing may not agree with the results of the CVP analysis a. absorption b. variable c. direct d. marginal

b. higher than

Net operating income under absorption costing is generally ___ net operating income under variable costing in periods in which inventory increases a. equal to b. higher than c. less than

common

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

traceable

The segment margin equals the segment's cm less the segment's ___ fixed costs.

absorption, variable

costs are categorized by function when using ___ costing and by behavior when using ___ costing.

absorption, variable

Fixed manufacturing overhead costs are expensed as units are sold as part of COGS under ____ costing, and expensed in full with period costs under ___ costing.

segment, contribution

From a decision making point of view, ___ margin is most useful for major capacity decisions and ___ margin is most useful for short-term sales volume decisions.

a. both income statements include product and period costs c. reported net income on the statements often differ

Which of the following statements are correct regarding income statements prepared under variable and absorption costing? (Select all that apply) a. both income statements include product and period costs b. absorption costing categorizes costs based on cost behavior c. reported net income on the statements often differ d. the differences between the statements is how total manufacturing overhead is accounted for.

a. fixed manufacturing OH b. direct labor c. direct materials e. variable manufacturing OH

Product costs under absorption costing are: (Select all that apply) a. fixed manufacturing OH b. direct labor c. direct materials d. fixed selling and admin e. variable manufacturing OH f. variable selling and admin

c. traceable fixed cost to the plant and a common fixed cost for the individual product lines made in the plant

Arbor Co. manufactures appliances at 3 facilities. Each location has a plant manager who oversees the man. process for the location. Segmented income statements are prepared for each plant and for each product man. in that plant. The salary of each plant manager is a: a. common fixed cost for both the plant and the individual product lines made in the plant b. traceable fixed cost for both the plant and the individual product lines made in the plant. c. traceable fixed cost to the plant and a common fixed cost for the individual product lines made in the plant d. common fixed cost for the plant and a traceable fixed cost for the individual product lines made in the plant.