Chapter 6 Accounting 212 Smartbook Stuff

Commonwealth Company has the following unit costs: direct materials $2, direct labor $4, variable overhead $1, fixed overhead $3. Under the absorption costing method, what is the total unit cost?

$10

Loudon Company has the following unit costs: direct materials $6, direct labor $3, variable overhead $2, fixed overhead $1. Under absorption costing, total unit cost is:

$12

When units produced equals units sold, income under absorption costing will be blank (>,<,=) net income under variable costing.

Blank 1: =

The percent by which a product's unit selling price exceeds its total unit variable cost is the:

contribution margin ratio.

A contribution margin income statement shows:

sales-variable costs

Differences in income between variable costing and absorption costing is due to

timing

An income statement which shows the excess of sales over variable costs is referred to as a blank blank income statement.

Blank 1: contribution Blank 2: margin

True or false: When units produced are less than units sold, net income under absorption costing will be less than net income computed under variable costing.

True

The variable costing method includes all of the following costs (select all that apply):

direct materials direct labor variable overhead

The contribution margin ratio is interpreted as the percent of:

each sales dollar that remains after deducting unit variable cost

When using absorption costing when production is greater than sales, a portion of fixed overhead is allocated to:

ending inventory

When units produced equals units sold, income under variable costing as compared to net income under absorption costing will be

equal to

A system of rewarding managers by linking bonuses to income computed under absorption costing may result in:

excess inventory buildup

Service firms should focus on _____ costs in managerial decisions.

variable

Since service firms do not produce inventory, they should focus primarily on

variable costs.

Trudy Company is using variable costing. Which of the following items would be included in Trudy's product costs? Select all that are correct. (Check all that apply).

variable overhead direct materials direct labor

Regardless of whether variable costing or absorption costing is used, if quantity produced differs from quantity sold, income will be blank (similar, different, indeterminable).

Blank 1: different

Production planning is important because producing too much can lead to blank(excess, insufficient) inventory.

Blank 1: excess

Under absorption costing, fixed overhead is allocated to products sold, so when production is greater than units sold, net income will be blank (greater, less) than income calculated under variable costing.

Blank 1: greater

When units produced are less than units sold, net income computed under variable costing will be blank (greater, less) than net income computed under absorption.

Blank 1: greater

Under the blank (absorption,variable) costing method only variable costs are assigned to products.

Blank 1: variable