Cost Accounting Chapter 6

Which of the following costing approaches is best suited for cost-volume-profit analysis? A. Absorption B. Normal C. Standard D. Variable

D. Variable

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. A. is greater than B. is less than C. is equal to

A. is greater than

Assuming that direct labor is a variable cost, the primary difference between the absorption and variable costing is that: A. variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs. B. variable costing treats only direct materials and direct labor as product cost while absorption costing treats direct materials, direct labor, and the variable portion of manufacturing overhead as product costs. C. variable costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs while absorption costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs. D. variable costing treats only direct materials, direct labor, the variable portion of manufacturing overhead, and the variable portion of selling and administrative expenses as product cost while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.

A. variable costing treats only direct materials, direct labor, and the variable portion of manufacturing overhead as product costs while absorption costing treats direct materials, direct labor, the variable portion of manufacturing overhead, and an allocated portion of fixed manufacturing overhead as product costs.

Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $95,300. The South Division's divisional segment margin is $45,800 and the West Division's divisional segment margin is $174,000. What is the amount of the common fixed expense not traceable to the individual divisions? A. $141,100 B. $124,500 C. $269,300 D. $219,800

B. $124,500

Max, Incorporated, has two divisions, South Division and North Division. South Division's sales, contribution margin ratio, and traceable fixed expenses are $500,000, 60%, and $100,000, respectively. What is the segment margin for the South Division? A. $100,000 B. $200,000 C. $300,000 D. $400,000

B. $200,000

Which of the following statements about the segment margin is not true? A. In preparing a segmented income statement, the variable expenses are deducted from sales to yield the contribution margin for each segment. B. The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin. C. The segment margin represents the margin available after a segment has covered all of its own costs. D. The segment margin is the best gauge of the long-run profitability of a segment because it includes only those costs that are caused by the segment.

B. The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin.

Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores? A. store manager salaries B. the cost of corporate advertising aired during the Super Bowl C. cost of goods sold at each store D. store building depreciation expense

B. the cost of corporate advertising aired during the Super Bowl

A reason why absorption costing income statements are sometimes difficult to interpret is that: A. they ignore inventory levels in determining cost of goods sold. B. they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories. C. they omit variable expenses entirely in computing net operating income. D. they include all fixed manufacturing overhead on the income statement each year as a period cost.

B. they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.

When the number of units produced is greater than the number of units sold, variable costing net operating income will be ________. A. the same as absorption costing net operating income B. greater than absorption costing net operating income C. less than absorption costing net operating income

C. less than absorption costing net operating income

Bovine Corporation has two divisions: televisions and mobile phones. The mobile phone division has a contribution margin of $600,000. The company's common fixed costs and total traceable fixed costs are $100,000 and $500,000 respectively. Assuming the traceable fixed costs of the television division are $300,000, what is the segment margin of the mobile phone division? A. $100,000 B. $200,000 C. $300,000 D. $400,000

D. $400,000

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price =$117 Units in beginning inventory = 0 Units produced = 2,900 Units sold = 2,500 Units in ending inventory = 400 Variable costs per unit: Direct materials = $32 Direct labor = $45 Variable manufacturing overhead = $2 Variable selling and administrative expense = $9 Fixed costs: Fixed manufacturing overhead = $43,500 Fixed selling and administrative expense = $15,000 The total gross margin for the month under absorption costing is: A. $95,100 B. $20,000 C. $72,500 D. $57,500

D. $57,500

In its first year of operations, Bronfren Corporation produced 800,000 sets and sold 780,000 sets of artificial tan lines. What would have happened to net operating income in this first year under the following costing methods if Bronfren had produced 20,000 fewer sets? (Assume that Bronfren has both variable and fixed production costs.) Variable costing Absorption costing A. No effect Increase B. Decrease Increase C. Decrease Decrease D. No effect Decrease

D. No effect, Decrease

Absorption costing income statements ignore ________. A. direct materials and direct labor costs B. direct and indirect cost distinctions C. product and period cost distinctions D. variable and fixed cost distinctions

D. variable and fixed cost distinctions

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. A. is greater than B. is less than C. is equal to

C. is equal to

Decide how each cost is treated on an income statement prepared using the variable costing approach. Using the dropdown boxes, indicate whether each cost item is treated as a period cost or product cost. 1. Direct Labor: 2. Fixed manufacturing overhead: 3. Variable manufacturing overhead: 4. Fixed selling and administrative expenses: 5. Variable selling and administrative expenses:

1. Product cost 2. Period cost 3. Product cost 4. Period cost 5. Period cost

A company produces a single product. Variable production costs are $12.70 per unit and variable selling and administrative expenses are $3.70 per unit. Fixed manufacturing overhead totals $43,000 and fixed selling and administration expenses total $47,000. Assuming a beginning inventory of zero, production of 4,700 units and sales of 3,950 units, the dollar value of the ending inventory under variable costing would be: Multiple Choice A. $6,750 B. $9,525 C. $12,300 D. $16,275

B. $9,525

The difference between absorption costing net operating income and variable costing net operating income can be explained by the way these two methods account for ________. A. all overhead costs B. fixed overhead costs C. selling and administrative expenses D. variable overhead costs

B. fixed overhead costs

Beginning inventory = 0 Units produced = 500 Units sold = 400 Ending inventory = 100 Excerpt from Wallis Corporation Per Unit Per Month Selling price = $100 Direct materials = $30 Direct labor = $20 Variable manufacturing overhead = $10 Variable selling & administrative expenses = $7 Fixed manufacturing overhead = $10,000 Fixed selling and administrative expenses = $3,000 What is the cost of goods sold for the month of January using the absorption costing method? A. $24,000 B. $30,000 C. $32,000 D. $40,000

C. $32,000

Which of the following is a common mistake made by companies when assigning costs to segments? A. They use allocation bases that drive the costs when assigning costs to segments. B. They trace fixed expenses to segments when it is feasible to do so. C. They assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs. D. They include "upstream" and "downstream" costs when preparing profitability analyses that relate to individual product costs.

C. They assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs.

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory = 0 Units produced = 4,300 Units sold = 4,200 Units in ending inventory =100 Variable costs per unit: Direct materials = $47 Direct labor $49 Variable manufacturing overhead = $12 Variable selling and administrative expense = $10 Fixed costs: Fixed manufacturing overhead =$90,300 Fixed selling and administrative expense = $42,000 What is the variable costing unit product cost for the month? A. $123 per unit B. $139 per unit C. $118 per unit D. $108 per unit

D. $108 per unit

Beginning inventory = 0 Units produced = 500 Units sold = 400 Ending inventory = 100 Excerpt from Wallis Corporation Per Unit Per Month Selling price = $100 Direct materials = $30 Direct labor = $20 Variable manufacturing overhead = $10 Variable selling & administrative expenses = $7 Fixed manufacturing overhead = $10,000 Fixed selling and administrative expenses = $3,000 What is the company's contribution margin for January? A. $200 B. $13,200 C. $26,800 D. $40,000

B. $13,200

Excerpt from Areojet Corporation records for month of February: Per Unit Per Month Selling price = $200,000 Direct materials used in production = $40,000 Direct labor = $10,000 Variable manufacturing overhead = $2,000 Fixed manufacturing overhead = $140,000 Variable selling and administrative expenses = $20,000 Fixed selling and administrative expenses = $40,000 Beginning Inventory = 0 Units Produced = 3 Units Sold = 3 Ending inventory = 0 Assuming the absorption costing method is used, what is the total manufacturing costs per unit added to work in process during the month of February? A. $52,000 B. $92,000 C. $87,000 D. $122,000

B. $92,000

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. A. is greater than B. is less than C. is equal to

B. is less than