ch 6 ACCT

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are selling and administrative expenses period costs or product costs?

(NEVER product) period costs

absorption costing def

a costing method that includes all of the manufacturing costs- DM, DL, and both FOH and VOH- in the unit product costs.

variable costing def

a costing method that includes only variable manufacturing costs- DM, DL, and VOH- in unit product costs

traceable fixed cost def

a fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated.

common fixed cost def

a fixed cost that supports more than one business segment, but its not traceable in whole or in part to any one of the business segments

segment margin def

a segment's contribution margin less its traceable fixed costs. It represents the margin available after a segment has covered all of it's own traceable costs.

how to differentiate a traceable cost from a common cost?

a traceable cost is one that would disappear if the segment was dropped

difference between a traceable fixed cost and a common fixed cost?

a traceable is for the segment, while a common is common to the whole area

Out of variable costing and Absorption, which one is GAAP?

absorption

Out of variable costing and Absorption, which one is for external purposes only?

absorption

segment deg

any part or activity of an organization about which managers seek cost, revenue, or profit data

most useful in decisions involving short-run changes in volume

contribution margin

variable costing is also known as

direct costing, marginal costing

product costs

dm, dl, VOH, FOH

ending inventory and absorption net income do or do not move in the same direction?

ending inventory and absorption net income do in the same direction

What is the main difference between variable costing and absorption costing methods?

fixed manufacturing overhead. (FOH is included with absorption)

for absorption costing, FOH is treated as ______ costs

for absorption costing, FOH is treated as product costs

for variable costing, FOH is treated as ______ costs

for variable costing, FOH is treated as period costs

what is absorption costing also known as

full cost

if units produced is less than units sold, what happens to the inventory and difference between absorption and variable costing?

inventory decreases, absorption less than variable costing (EI down, GNOI down)

if units produced is more than units sold, what happens to the inventory and difference between absorption and variable costing?

inventory increases, absorption bigger than variable costing (EI ^, GNOI ^)

if units produced= units sold, what happens to the inventory and difference between absorption and variable costing?

no change in inventory, absorption = variable costing (EI =, GNOI =)

for variable expenses, how is FOH treated?

period cost (expensed immediately)

example of common fixed costs

president/ CEO/ salary,

segment margin

segment contribution margin- traceable fixed costs

best gauge of the long-run profitability of a segment

segment margin

segmented profit margin fomula

segment profit margin - fixed expenses controllable by others (like CEO salary, Headquarter's rent) = segmented profit margin

if a segment were entirely eliminated, what would be the effect on a TRUE common fixed cost

unchanged

Out of variable costing and Absorption, which one is for internal purposes only?

variable

when is FOH shown on the income statement under variable costing

when incurred

when is FOH shown on the income statement with absorption

when the product is sold


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