ACCT CHAPTER 6

A company with three segments has $10,000 in common fixed expenses. All three segments are at the break-even point. As a result, the company Blank_

has an overall net operating loss of $10,000

Financial statement users need to be aware of changes in inventory levels when using ____,

absorption

Citrus Scents produces body sprays. Variable selling and administrative expense is $1.05 per bottle and fixed selling and administrative expense is $4,500 per month. If 1,490 bottles are produced and 1,203 are sold in July, total selling and administrative expense for the month will be ______.

5,763.15

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

Absorption costing

The two general costing approaches used by manufacturing companies to prepare income statements are _____ costing and ____ costing.

absorption or full Blank 2: variable , marginal, or direct

Net operating income is less under absorption costing than under variable costing when inventory for the period Blank______.

decreases

A segment should probably be dropped when the segment Blank______.

has a contribution margin that cannot cover traceable fixed costs cannot cover its own costs

Absorption and variable costing net income are usually different due to the accounting for

fixed manufacturing overhead

The difference between reported net income on variable costing and absorption costing income statements is based on how Blank______

fixed overhead is accounted for

An absorption costing income statement calculates Blank______.

gross margin by deducting cost of goods sold from sales

Assigning common fixed costs to segments impacts Blank____

segment margin only

Using variable costing and the contribution approach for internal decision making Blank______.

supports decision making facilitates explaining changes in net income enables CVP analysis

Absorption costing is Blank______.

used by most companies for both internal and external reports required by GAAP and IFRS

Direct costing or marginal costing are other terms for ___ costing

variable

If a segment is entirely eliminated, common fixed costs will

not change