Chapter #6

The company-wide break-even sales will always be ______ the sum of the segment break-even sales.

higher than

The segment margin represents the ______.

margin available after a segment has covered all of its own costs

Absorption costing treats fixed manufacturing overhead as a ______ cost.

product

The segment margin is the best gauge for assessing the long-run ______ of a segment.

profitability

Assigning common fixed costs to segments impacts ______.

segment margin only

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

fixed overhead is accounted for

A traceable fixed cost ______.

is incurred because of the existence of the segment

Variable costing treats ______ manufacturing costs as product costs.

only variable

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 of a store is a ______ the product lines.

traceable fixed cost for the store and a common fixed cost for

Segment margin is obtained by deducting each segment's ______.

traceable fixed costs from its contribution margin

Direct costing or marginal costing are other terms for costing.

variable

The variable costing income statement separates ______.

variable and fixed expenses

Select all that apply When calculating the profit impact of discontinuing a segment, consider ______.

the segment's traceable fixed costs the segment's contribution margin

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

Dollar break-even for a company is calculated as ______.

(Traceable fixed expenses + Common fixed expenses) ÷ Overall CM ratio

Which of the following is NOT a common mistake made in preparing segmented income statements?

Computing contribution margin instead of gross margin.

Absorption costing net income may be computed by multiplying the number of units sold by the contribution margin per unit and subtracting total fixed expenses.

False

Which of the following statement is correct?

Internal income statements are generally prepared using variable costing and external income statements are generally prepared using absorption costing.

Because nonmanufacturing costs are not included as costs of a product, the use of costing can lead to the omission of segment costs.

absorption

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a ______ for the individual product lines made in the plant

traceable fixed cost to the plant and a common fixed cost

Sleep Tight manufactures pillows. The company incurred $42,000 of fixed manufacturing overhead cost this year. Variable unit product cost was $17. Variable selling and administrative cost was $9 per unit and fixed selling and administrative expenses totaled $59,000. The company manufactured 28,000 pillows and sold 15,408. Total fixed expenses on the variable costing contribution format income statement equal ______.

$101,000

SPS Products has two divisions—Catalog Sales and Online Sales. For the last quarter the Catalog Sales segment margin was ($5,000). Online sales were $100,000. Online Sales contribution margin was $60,000, and its segment margin was $40,000. If Catalog Sales are discontinued, it is estimated that online sales will increase by 10%. Discontinuing Catalog Sales should increase company profits by ______.

$11,000

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 total Units: 10,000 produced and 6,000 sold

$155

Select all that apply Which of the following statements are correct regarding income statements prepared under variable and absorption costing?

Reported net income on the statements often differ. Both income statements include product and period costs.

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

absorption variable

Fixed manufacturing overhead costs are included as part of Work in Process inventory under ______.

absorption costing only

Comfy Cozy Chairs makes rockers that require $45 of direct materials and $37 of direct labor. Variable manufacturing overhead is $8 per rocker, and fixed manufacturing overhead totals $58,000. Variable selling and administrative costs are $15 per rocker, and fixed selling and administrative costs total $102,000. During the period, 2,000 rockers were produced and 1,640 were sold. The unit product cost using absorption costing is ______.

$119

The Quaint Quilt produces and sells handmade quilts. Variable manufacturing costs total $140 per quilt. Fixed manufacturing overhead totals $68,250 per quarter. Variable selling and administrative costs are $19 per quilt sold, and fixed selling and administrative costs are $50,000 per quarter. Last quarter, the company produced 910 quilts and sold 780 quilts. Total variable expenses reported on Quaint Quilt's variable costing income statement for the quarter is ______.

$124,020

JPL Company has two segments - Retail and Commercial. The Retail segment has a contribution margin ratio of 40% and traceable fixed expenses of $70,000. Commercial has traceable fixed expenses of $50,000 and a contribution margin ratio of 55%. The company also has $30,000 of common fixed expenses. The break-even point in dollar sales for the Retail segment equals ______.

$175,000

A fixed cost that supports the operations of more than one segment, but is not traceable in whole or part to any one segment is a(n) fixed cost.

common

Variable costing net income may be computed by multiplying the number of units sold by the per unit and subtracting total expenses.

contribtion margin fixed

Variable costing income statements are based upon a ______ format.

contribution

An example of a traceable fixed cost for General Motors' Corvette Division is the ______.

depreciation on equipment used to manufacture Corvettes

Select all that apply Common mistakes made by companies when assigning costs to segments include ______.

omitting costs that should be included arbitrarily allocating common fixed costs inappropriately assigning traceable fixed costs

Put'er There manufactures baseball gloves that require $22 of direct materials and $18 of direct labor. Variable manufacturing overhead cost is $7 per glove 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 ______.

$47.00

Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. This month 1,490 bottles were produced and 1,203 bottles were sold. Total cost of goods sold is ______.

$6,472.14

A company has two segments with total sales of $500,000 and total variable costs of $343,750. Traceable fixed expenses are $50,000 and common fixed expenses are $80,000. The break even in dollars for the company as a whole equals $ .

416,000

Frames, Inc. picture frames each require $19 of direct materials and $40 of direct labor. Variable manufacturing overhead cost is $9 per frame and variable selling and administrative expense is $13 per frame sold. Total fixed manufacturing overhead cost per month is $15,000 and the company produces 5,000 frames each month. 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 $

94,304

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

fixed manufacturing overhead

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 ______.

has an overall net operating loss of $10,000

Segment break-even calculations include ______ fixed expenses.

only traceable

If a segment is entirely eliminated, common fixed costs will ______.

not change

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a ______ for the individual product lines made in the plant.

traceable fixed cost to the plant and a common fixed cost