chp 19 managerial accounting connect

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 (add all up)

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

=

When using absorption costing, all of the following are included in product costs (select all answers that are applicable):

Direct labor, direct materials, variable overhead, fixed overhead

A contribution margin income statement shows:

Sales - Variable Costs

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

Which costing method can be helpful to management in setting prices because it reflects full costs that sales must exceed for the company to be profitable?

absorption costing

Cost information from (neither, both) costing method(s) is helpful to management in setting prices.

both

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

contribution margin

Regardless of whether variable costing or absorption costing is used, if quantity produced differs from quantity sold, income will be

different

The contribution margin ratio is interpreted as the percent of:

each sales dollar that remains after deducting unit variable cost

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

excess inventory buildup

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

greater

Managers should accept special orders if the special-order price

is greater than variable cost

Over the ____ run, selling prices must cover both fixed and variable costs.

long

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

timing

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.

variable overhead, direct labor, direct materials

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

contribution margin per unit