bus 215 ch 6

net income computed under _____ costing may not agree with the results of cvp analysis

absorption

the use of _____ costing can lead to the omission of segment costs because non manufacturing costs are not included as costs of a product

absorption

fixed manufacturing overhead costs are included as part of work in process inventory under

absorption costing

when inventory increases, which costing method generally results in higher net income

absorption costing

costs are categorized by function when using ______ costing and by behavior when using ______ costing

absorption; contribution

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

common mistakes made by companies when assigning costs to segments include

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

selling and administrative expenses

are always treated as period costs

a fixed cost that supports the operation of more than one segment, but is not traceable in whole or part to any one segment is a _______ fixed cost

common

variable costing income statements are based upon a ____ format

contribution margin

product costs under absorption costing are

direct materials and labor and variable and fixed manufacturing overhead

when using absorption costing, fixed manufacturing overhead cost per unit = total fixed manufacturing overhead divided by:

units produced

one mistake companies make when preparing segmented income statement is arbitrarily assigning ____ fixed costs to segments

untraceable

direct costing or marginal costing are other terms for

variable costing

the number of units produced does not affect net operating income when using

variable costing

for external reporting, income statements are generally prepared using _____ costing, and ______ costing is used for internal decision making purposes

variable; absorption

variable costing net income may be computed by multiplying the number of units sold by the ______ ______ per unit and subtracting total ______ expenses

contribution margin; fixed

net operating income is less under absorption costing than under variable costing when inventory for the period

decreases

incorrectly or arbitrarily assigning common costs to segments

distorts the profitability of segments, could reduce the overall profits of the company, and holds managers responsible for costs they cannot control

using variable costing and the contribution approach for internal decision making

enables cvp analysis, facilitates explaining changes in net income, and supports decision making

on an absorption costing income statement, selling and administrative expenses:

equal the amounts reported on a variable costing income statement; are reported as a single amount

when a segment is eliminated, a

fixed cost will disappear

a variable costing income statement

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

when units sold exceeded units produced, net income under variable costing will generally be _____ net income under absorption costing

higher than

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

increase in total

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

when inventory decreases, cost of goods sold under absorption costing will be ________ cost of goods sold under variable costing

more than

costs should be allocated to segments for internal decision making purposes

only when the allocation base actually drives the cost being allocated

a segment cannot cover its own costs, that segment should

probably be dropped

contribution format income statement

sales variable expenses contribution margin fixed expenses net operating income

from a decision point of view, ________ margin is most useful for majority capacity decisions and ______ margin is most useful for short term sales volume decisions

segment; contribution

a companys operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known as ______

segments

costs that can be traced directly to a segment

should not be allocated to other segments

absorption costing and variable costing net operating income will be equal when

the number of units produced equals the number of units sold and there is no beginning and no ending inventory

when there is no change in inventory, net operating income will be

the same under both absorption costing and variable costing

differences in net operating income between absorption costing and variable costing is due to the:

timing of when fixed manufacturing overhead is expensed