chapter 7 acct

the difference between absorption costing net income and variable costing net income can be explained by the way these two methods account for

fixed overhead costs

when the number of units produced is greater than the number of units sold, variable costing net operating income will be

less than absorption costing net operating income

in absorption costing, selling less than produced artificially ____________ net operating income

increases

segment

is any part or activity of an organization about which a manager seeks cost, revenue, or profit data. -individual store -service center -sales territory

segment margin

is computed by subtracting the traceable fixed costs of a segment from its contribution margin. (this is the best gauge of the long-run profitability of a segment)

traceable fixed costs arise because

the existence of a particular segment and would disappear over time if the segment itself disappeared

two keys to building a segmented income statement: a _______ ______ format should be used because it separates fixed from variable costs and it enables the calculation of a contribution margin traceable fixed costs should be ________ from common costs to enable the calculation of a segment margin

- contribution format -separated

which method will produce the highest values for work in process and finished goods inventory?

absorption costing because it treats fixed overhead as a product cost (inventory)

common fixed costs arise because

the overall operation of the company and would not disappear if any particular segment were eliminated.

absorption costing income statements ignore

variable and fixed cost distinctions

which of the following costing approaches is best suited for cost-volume-profit analysis

variable costing system

when the units produced are equal to the units sold, the net operating income computed using the variable costing method is ________ the net operating income using the absorption costing method

is equal to

When the units produced are less than the units sold, the net operating income computed using the variable costing method is ______ the net operating income using the absorption costing method.

is greater than

when the units produced exceed the units sold, the net operating income computed using the variable costing method is _____________the net operating income using the absorption costing method

is less than

in absorption costing, if FMOH is a product cost, it is not realized as an expense on the income statement until the product is

sold