ACCT- Ch 6

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 _____.

$6,472.14

Variable costing

Categorized by behavior

Absorption costing

Categorized by function

Fixed manufacturing overhead costs are included as part of Work in Process inventory under ______.

absorption costing only

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

absorption, variable

The two general costing approaches used by manufacturing companies to prepare income statements are ____ costing and ____ costing.

absorption, variable

Under absorption costing product costs consist of ______ costs.

both variable and fixed manufacturing

When inventory increases, absorption costing net operating income is higher than variable costing net income due to the fixed manufacturing overhead ______.

deferred in the inventory account on the balance sheet

An example of a traceable fixed cost for General Motors' Corvette Division is the ______.

depreciation on equipment used to manufacture Corvettes

Differences in net operating income between super-variable and variable costing occur because of the treatment of ______ costs under the two methods.

direct labor

True or false: Absorption costing and variable costing always result in the same net operating income each year.

false

Absorption costing net operating income may not agree with the net operating income calculated for CVP analysis due to the way in which ______ is handled in absorption costing.

fixed manufacturing overhead

The difference between reported net income on variable costing and absorption costing income statements is based on how ______.

fixed overhead is accounted for

Contribution margin computed using super-variable costing will be ______ than the contribution margin computed using traditional variable costing.

higher than

Total fixed costs on a super-variable costing income statement will be ______ than total fixed costs on a traditional variable costing income statement.

higher than

Common mistakes made by companies when assigning costs to segments include ______.

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

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ in total as the number of units produced increases.

increase

Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions made to ______ products that are, in fact, profitable.

pricing; drop

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

produced

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead cost divided by units:

produced

Absorption costing treats fixed manufacturing overhead as a ______ cost.

product

U.S. GAAP and IFRS ______ publicly traded companies include segmented financial data prepared for external users that use the same methods used in internal segment reports.

require

GAAP and IFRS rules for publicly traded companies ______.

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

Absorption costing is ______.

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

Place the following line items in order to construct a contribution format income statement.

sales, variable expenses, contribution margin, fixed expenses, net operating income

Assigning common fixed costs to segments impacts ______.

segment margin only

Costs that can be traced directly to a segment ______.

should not be allocated to other segments

When calculating the profit impact of discontinuing a segment, consider ______.

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

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

traceable

A cost that can be traced directly to a specific segment should be charged directly to that segment and not allocated to other segments.

true

Super-variable costing treats all manufacturing overhead as a fixed cost.

true

Using absorption costing for segmented income statements can lead to ______.

under-costing of segments omission of upstream and downstream costs

Direct costing or marginal costing are other terms for ____ costing.

variable

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

variable

The variable costing income statement separates ______.

variable and fixed expenses

For external reporting, income statements are generally prepared using ____ costing, while ____ costing is used for internal decision making purposes.

absorption, variable

A variable costing income statement ______.

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

Discontinuing a profitable segment results in ______.

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

Using variable costing and the contribution approach for internal decision making ______.

enables CVP analysis supports decision making facilitates explaining changes in net income

All direct labor and manufacturing overhead is treated as fixed under ______ costing.

super-variable

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 ______.

$11,000

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 ______.

$119

The Quaint Quilt produces and sells handmade quilts. Variable manufacturing costs total $140 per quilt. Fixed manufacturing overhead totals $68,250 per quarter. Variable selling and administrative costs are $19 per quilt sold, and fixed selling and administrative costs are $50,000 per quarter. Last quarter, the company produced 910 quilts and sold 780 quilts. The total variable cost reported on Quaint Quilt's variable costing income statement is ______.

$124,020

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

$155

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

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 ______.

$47.00

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 $____.

68

Pearls, Pearls, Pearls! manufactures and sells jewelry. The total variable cost of goods sold this month is $72,490. Variable selling and administrative cost is $22 per unit sold. If 350 units are produced and 314 units are sold this month, the total variable cost reported on the income statement for the month is $ ____.

79,398

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 $ ____.

94,304

Which of the following is NOT a common mistake made in preparing segmented income statements?

Computing contribution margin instead of gross margin.

Which of the following costs are considered variable under super-variable costing?

Direct materials

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

absorption

Financial statement users need to be aware of changes in inventory levels when using ____ costing.

absorption

In order to comply with GAAP and IFRS, the ______ costing method must be used for external reporting in the United States.

absorption

Net income computed under ______ costing may not agree with the results of CVP analysis.

absorption

An otherwise profitable segment may appear to be unprofitable if ____ fixed costs are allocated to it.

common

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

common

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

common

Variable costing income statements are based upon a ______ format.

contribution

A traceable fixed cost ______.

is incurred because of the existence of the segment

The segment margin represents the ______.

margin available after a segment has covered all of its own costs

Segmented income statements ______.

may be prepared for activities at many levels in a company

If a segment is entirely eliminated, common fixed costs will ______.

not change

Segment break-even calculations include ______ fixed expenses.

only traceable

Variable costing treats Blank______ manufacturing costs as product costs.

only variable

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.

traceable fixed cost to the plant and a common fixed cost

When a segment is eliminated, a ______.

traceable fixed cost will disappear common fixed cost will remain unchanged

Segment margin is obtained by deducting each segment's ______.

traceable fixed costs from its contribution margin

When preparing a segment margin income statement ______.

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

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 of a store is the ____ fixed cost of the store and the ____ fixed cost of each product line sold in the store.

traceable, common

Which of the following are NOT inventoriable costs under super-variable costing?

Fixed overhead Direct labor

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

variable, absorption

Variable costing income statements separate ____ expenses from ____ expenses.

variable, fixed