ACCT 202 Ch 6

A variable costing income statement ______. -is constructed exactly like an absorption costing income statement -does not include fixed manufacturing overhead, which is included on an absorption costing income statement -calculates contribution margin while the absorption costing income statement calculates gross margin -focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs

-calculates contribution margin while the absorption costing income statement calculates gross margin -focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs

A segment should probably be dropped when the segment ______. -has a positive segment margin but cannot cover any common fixed costs -cannot cover its own costs -has a contribution margin that cannot cover traceable fixed costs -has important side effects on other segments

-cannot cover its own costs -has a contribution margin that cannot cover traceable fixed costs

Product costs under absorption costing include ______. -direct labor -direct materials -fixed manufacturing overhead -variable selling and administrative -variable manufacturing overhead -fixed selling and administrative

-direct labor -direct materials -fixed manufacturing overhead -variable manufacturing overhead

When a segment is eliminated, a ______. -traceable fixed cost will disappear -traceable fixed cost will remain unchanged -common fixed cost will disappear -common fixed cost will remain unchanged

-traceable fixed cost will disappear -common fixed cost will remain unchanged

Comfy Cozy Chairs makes rockers that require $45 of direct materials and $37 of direct labor. Variable manufacturing overhead is $8 per rocker, and fixed manufacturing overhead totals $58,000. Variable selling and administrative costs are $15 per rocker, and fixed selling and administrative costs total $102,000. During the period, 2,000 rockers were produced and 1,640 were sold. The unit product cost using absorption costing is ______. A)$119 B)$125 C)$90 D)$105

A)$119 Reason: $45 + $37 + $8 + ($58,000 ÷ 2,000) = $119

When using variable costing, fixed manufacturing overhead is ______. A)expensed in the period incurred B)assigned to units of the product and expensed as the units are sold C)never expensed

A)expensed in the period incurred

If a segment is entirely eliminated, common fixed costs will ______. A)not change B)be eliminated C)decrease

A)not change

When a segment cannot cover its own costs, that segment should ______. A)probably be dropped B)be combined with another profitable segment C)recalculate its segment margin without including common fixed costs

A)probably be dropped

The variable costing income statement separates ______. A)variable and fixed expenses B)product and period costs C)selling and administrative expenses D)direct and indirect expenses

A)variable and fixed expenses

Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. This month 1,490 bottles were produced and 1,203 bottles were sold. Total cost of goods sold is ______. A)$1,544.06 B)$8,016.20 C)$6,472.14

$6,472.14 Reason: $5.38 × 1,203 = $6,472.14

Variable costing income statements separate _______ expenses from ______ expenses.

Blank 1: variable Blank 2: fixed

Sleep Tight manufactures pillows. The company incurred $42,000 of fixed manufacturing overhead cost this year. Variable unit product cost was $17. Variable selling and administrative cost was $9 per unit and fixed selling and administrative expenses totaled $59,000. The company manufactured 28,000 pillows and sold 15,408. Total fixed expenses on the variable costing contribution format income statement equal ______. A)$708,768 B)$101,000 C)$59,000 D)$671,096

B)$101,000 Reason: $42,000 + $59,000 = $101,000

Blink sells and manufactures frames for eyeglasses. The unit product cost for frame #47320 is $76.35. Last period, Blink produced 200 frames and sold 155 of them. Total cost of goods sold equals ______. A)$15,270.00 B)$11,834.25 C)$3,435.75 D)$231.35

B)$11,834.25 Reason: $76.35 × 155 = $11,834.25

Under absorption costing product costs consist of ______ costs. A)only variable manufacturing B)both variable and fixed manufacturing C)all manufacturing and selling and administrative D)only fixed manufacturing

B)both variable and fixed manufacturing

When using variable costing, fixed manufacturing overhead is ______. A)never expensed B)expensed in the period incurred C)assigned to units of the product and expensed as the units are sold

B)expensed in the period incurred

Under variable costing the cost of a unit of inventory does not contain ______. A)direct labor B)fixed manufacturing overhead C)variable manufacturing overhead D)direct materials

B)fixed manufacturing overhead

An absorption costing income statement calculates ______. A)net income by deducting fixed costs from contribution margin B)gross margin by deducting cost of goods sold from sales C)contribution margin by deducting variable costs from sales D)net income by deducting selling and administrative costs from contribution margin

B)gross margin by deducting cost of goods sold from sales

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)lower than

B)higher than

A traceable fixed cost ______. A)supports the operations of more than one segment B)is incurred because of the existence of the segment C)will continue if the segment is discontinued D)varies with the activity level in a particular segment

B)is incurred because of the existence of the segment

A traceable fixed cost ______. A)varies with the activity level in a particular segment B)is incurred because of the existence of the segment C)will continue if the segment is discontinued D)supports the operations of more than one segment

B)is incurred because of the existence of the segment

When inventory decreases, cost of goods sold under absorption costing will generally be ______ cost of goods sold under variable costing. A)less than B)more than C)equal to

B)more than

Under both variable costing and absorption costing, variable and fixed selling and administrative costs are treated as ______ costs. A)product B)period

B)period

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead cost divided by units: A)(produced - units sold). B)produced. C)sold. D)in ending inventory.

B)produced.

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead cost divided by units: A)in ending inventory. B)produced. C)sold. D)(produced - units sold).

B)produced.

Absorption costing treats fixed manufacturing overhead as a ______ cost. A)period B)product

B)product

Costs are separated between variable and fixed expenses when using ______ costing, whereas ______ costing separates costs between product and period. A)absorption, variable B)variable, absorption

B)variable, absorption

Blissful Breeze manufactures and sells ceiling fans. Variable selling and administrative expense is $11.50 per fan and fixed selling and administrative expense is $7,800 per month. If Blissful Breeze produces 900 fans and sells 842 fans this month, total selling and administrative expenses will be $_____

Blank 1: 17,483 or 17483

Granny's Touch manufactures and sells cookbooks. The company's variable cost of goods sold is $39,200 and variable selling and administrative expense is $6,200. Fixed manufacturing overhead is $19,700 and fixed selling and administrative expense is $9,290. An income statement prepared using variable costing shows $______

Blank 1: 28,990 or 28990

A company has two segments with total sales of $500,000 and total variable costs of $343,750. Traceable fixed expenses are $50,000 and common fixed expenses are $80,000. The break even in dollars for the company as a whole equals $______

Blank 1: 416,000

Frames, Inc. picture frames each require $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame and variable selling and administrative expense is $13 per frame sold. Total fixed manufacturing overhead cost per month is $15,000 and the company produces 5,000 frames each month. The unit product cost of each frame using variable costing is $ ______

Blank 1: 68

Blissful Breeze manufactures and sells ceiling fans. Each fan has a unit product cost of $112 and a unit selling price of $190. If Blissful Breeze produces 900 fans and sells 842 fans this month, the total cost of goods sold will be $______

Blank 1: 94,304 or 94304

Costs are categorized by function when using ______ costing and by behavior when using ______ costing.

Blank 1: absorption Blank 2: variable or contribution

A fixed cost that supports the operations of more than one segment, but is not traceable in whole or part to any one segment is a(n) _______ fixed cost

Blank 1: common

Absorption costing net income is calculated by subtracting selling and administrative expenses from _____ _____

Blank 1: gross Blank 2: margin or profit

When allocating fixed manufacturing overhead cost to units under absorption costing, the total fixed overhead costs must be divided by the number of units _____

Blank 1: produced, manufactured, made, or completed

Given the following information, calculate the unit product cost under absorption costing. Direct materials: $50/unit Direct labor: $75/unit Variable manufacturing overhead: $27/unit Fixed manufacturing overhead: $30,000 total Units: 10,000 produced and 6,000 sold A)$128 B)$152 C)$155 D)$157

C)$155 Reason: $50 + $75 + $27 + ($30,000 ÷ 10,000) = $155 per unit

Put'er There manufactures baseball gloves that require $22 of direct materials and $18 of direct labor. Variable manufacturing overhead cost is $7 per glove and fixed manufacturing overhead cost is $19,000 in total. Variable selling and administrative costs are $11 per unit sold and fixed selling and administrative costs are $13,200. Last period, 800 gloves were produced, and 585 gloves were sold. The unit product cost using variable costing is _____. A)$70.75 B)$81.75 C)$47.00 D)$58.00

C)$47.00 Reason: $22 + $18 + $7 = $47

Dollar break-even for a company is calculated as ______. A)Traceable fixed expenses ÷ Overall CM ratio B)(Traceable fixed expenses - Common fixed expenses) ÷ Overall CM ratio C)(Traceable fixed expenses + Common fixed expenses) ÷ Overall CM ratio D)Common fixed expenses ÷ Overall CM ratio

C)(Traceable fixed expenses + Common fixed expenses) ÷ Overall CM ratio

Selling and administrative expenses ______. A)may be treated as either product or period costs B)are treated as period costs under absorption costing only C)are always treated as period costs D)are treated as period costs under variable costing only

C)are always treated as period costs

An example of a traceable fixed cost for General Motors' Corvette Division is the ______. A)direct materials used in the production of the Corvettes B)utilities cost of the General Motors corporate headquarters C)depreciation on equipment used to manufacture Corvettes D)salary of the General Motors Chief Executive Officer

C)depreciation on equipment used to manufacture Corvettes

Under variable costing the cost of a unit of inventory does not contain ______. A)direct materials B)variable manufacturing overhead C)fixed manufacturing overhead D)direct labor

C)fixed manufacturing overhead

When units sold exceed units produced, net income under variable costing will generally be ______ net income under absorption costing. A)equal to B)lower than C)higher than

C)higher than

Segment break-even calculations include ______ fixed expenses. A)only common B)both traceable and common C)only traceable

C)only traceable

Variable costing treats ______ manufacturing costs as product costs. A)all B)only fixed C)only variable D)no

C)only variable

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 ______. A)$116,667 B)$250,000 C)$212,500 D)$175,000

D)$175,000 Reason: $70,000 ÷ 40% = $175,000

An example of a traceable fixed cost for General Motors' Corvette Division is the _____. A)salary of the General Motors Chief Executive Officer B)direct materials used in the production of the Corvettes C)utilities cost of the General Motors corporate headquarters D)depreciation on equipment used to manufacture Corvettes

D)depreciation on equipment used to manufacture Corvettes