Chapter 6 Smartbook Managerial Accounting
categorized by function
absorption costing
Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. The company produced 1,490 bottles this month and sold 1,203 of those bottles. Total cost of goods sold was ______. $8,016.20 $1,544.06 $6,472.14
$6,472.14
Variable costing treats ______ manufacturing costs as product costs. only fixed only variable no all
only variable
True or false: Absorption costing and variable costing always result in the same net operating income each year.
False
Which of the following statements are correct regarding income statements prepared under variable and absorption costing? -Reported net income on the statements often differ. -Absorption costing categorizes costs based on cost behavior. -The difference between the statements is how total manufacturing overhead is accounted for. -Both income statements include product and period costs.
Reported net income on the statements often differ, Both income statements include product and period costs.
Financial statement users need to be aware of changes in inventory levels when using____ costing
absorption
Net income computed under ______ costing may not agree with the results of CVP analysis. variable marginal absorption direct
absorption
Fixed manufacturing overhead costs are included as part of Work in Process inventory under ______. -absorption costing only -both variable and absorption costing -neither variable and absorption costing -variable costing only
absorption costing only
Variable costing income statements are based upon a ______ format. traditional contribution product vs. period costs
contribution
Using variable costing and the contribution approach for internal decision making ______. enables CVP analysis is required as part of GAAP financial statements facilitates explaining changes in net income supports decision making
enables CVP analysis facilitates explaining changes in net income supports decision making
When using variable costing, fixed manufacturing overhead is ______. -never expensed -assigned to units of the product and expensed as the units are sold -expensed in the period incurred
expensed in the period incurred
Absorption and variable costing net income are usually different due to the accounting for ______. fixed manufacturing overhead selling and administrative costs variable manufacturing overhead all product costs all manufacturing overhead
fixed manufacturing overhead
if a segment is entirely eliminated, common fixed costs will ______. not change be eliminated decrease
not change
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 divided by units ______. in ending inventory sold (produced - units sold) produced
produced
When calculating the profit impact of discontinuing a segment, consider _____. the segment's contribution margin the segment's traceable fixed costs common costs allocated to the segment
the segment's contribution margin the segment's traceable fixed costs
The difference in net operating income between absorption costing and variable costing is due to the ______. amount of sales revenue reported format of the income statements amount of selling and administrative cost expensed time when fixed overhead is expensed
time when fixed overhead is expensed
The difference in net operating income between absorption costing and variable costing is due to the ______. format of the income statements time when fixed overhead is expensed amount of sales revenue reported amount of selling and administrative cost expensed
time when fixed overhead is expensed
Segment contribution margin equals segment revenue minus the _____expenses for the segment.
variable
The number of units produced does not affect net operating income when using ___costing
variable
Costs are separated between variable and fixed expenses when using ______ costing, whereas ______ costing separates costs between product and period. absorption, variable variable, absorption
variable, absorption
Absorption costing treats fixed manufacturing overhead as a ______ cost. product period
product
The variable costing income statement separates ______. variable and fixed expenses direct and indirect expenses product and period costs selling and administrative expenses
variable and fixed expenses
categorized by behavior
variable costing
Put'er There manufactures baseball gloves. Each glove requires $22 of direct materials and $18 of direct labor. Variable manufacturing overhead cost is $7 per unit 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 ______ per unit. $58 $81.75 $47 $70.75
$47
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; Units produced: 10,000; Units sold: 6,000. $152 $157 $155 $128
155
Frames, Inc. manufactures large wooden picture frames. Each frame requires $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame produced, and variable selling and administrative expense is $13 per frame sold. The company produces 5,000 units each month and total fixed manufacturing overhead cost per month is $15,000. The unit product cost of each frame using variable costing is $.____
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 $____
94
Why is CVP analysis more difficult when using absorption costing than when using variable costing? -Selling and administrative costs are ignored when performing CVP analysis. -CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing. -CVP analysis requires costs to be broken down into product and period costs, which is not done in absorption costing. -Fixed manufacturing overhead is ignored when performing CVP analysis.
CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing.
If a segment is eliminated, ____fixed costs that are not traced to the segment will not change
common
When a segment is eliminated, a ______. common fixed cost will disappear traceable fixed cost will remain unchanged common fixed cost will remain unchanged traceable fixed cost will disappear
common fixed cost will remain unchanged traceable fixed cost will disappear
When inventory increases, absorption costing net operating income is higher than variable costing net income due to the fixed manufacturing overhead ______. -released to the cost of goods sold account on the income statement -deferred in the inventory account on the balance sheet
deferred in the inventory account on the balance sheet
An example of a traceable fixed cost for General Motors' Corvette Division is the ______. depreciation cost on the equipment used to manufacture the Corvettes utilities cost of the General Motors corporate headquarters salary of the General Motors Chief Executive Officer direct materials used in the production of the Corvettes
depreciation cost on the equipment used to manufacture the Corvettes
Under variable costing the cost of a unit of inventory does not contain ______. variable manufacturing overhead direct labor fixed manufacturing overhead direct materials
fixed manufacturing overhead
Product costs under absorption costing include -fixed manufacturing overhead -direct materials -variable selling and administrative -variable manufacturing overhead -direct labor -fixed selling and administrative
fixed manufacturing overhead, direct materials, variable manufacturing overhead, direct labor
The difference between reported net income on variable costing and absorption costing income statements is based on how ______. - fixed overhead is accounted for - expenses are organized - the statements are formated - cost classifications are defined
fixed overhead is accounted for
Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ in total as the number of units produced increases. remain the same decrease increase
increase
A traceable fixed cost ______. supports the operations of more than one segment will continue if the segment is discontinued is incurred because of the existence of the segment varies with the activity level in a particular segment
is incurred because of the existence of the segment
Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions made to ______ products that are, in fact, profitable production; focus upon strategy; produce pricing; drop reporting; add
pricing; drop
Only costs that would disappear over time if a segment disappeared should be treated as ___ fixed costs.
traceable
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 for the store is a(n)____ fixed cost for the store, and a(n) ____fixed cost for each product line sold in the store.
traceable, common
True or false: Under absorption costing, fixed overhead is treated like a variable cost because a portion of the total cost is allocated to each unit produced, rather than being expensed as one large sum.
true
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. -variable manufacturing overhead -fixed selling and administrative expense -fixed manufacturing overhead -direct labor cost
fixed manufacturing overhead
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 direct labor cost fixed selling and administrative expense variable manufacturing overhead
fixed manufacturing overhead
Assigning common fixed costs to segments impacts ______. neither segment margin nor total corporate profit total corporate profit only both segment margin and total corporate profit segment margin only
segment margin only
For external reporting, income statements are generally prepared using ______costing, while ____costing is used for internal decision making purposes.
variable, absorption
The two general costing approaches used by manufacturing companies to prepare income statements are _____costing and ____costing
variable, absorption
Variable costing income statements separate ____expenses from ___--expenses.
variable, fixed