Managerial Accounting Chapter 6

What costing approach is best suited for cost-volume-profit analysis?

Variable

The use of absorption costing for segmented income statements results in ______.

omission of upstream and downstream costs.

When the units produced exceed the units sold, net operating income computed using the absorption costing approach is ______ the net operating income computed using the variable costing approach.

greater than

Break-Even Point

Fixed Expenses/Contribution Margin Ratio

Period Cost

Fixed Manufacturing Overhead, Fixed Selling and Administrative Expenses, Variable selling and Administrative Expenses

Cost of Goods Sold (Absorption)

Sales - Fixed Manufacturing Overhead

Contribution Margin

Sales - Variable Expenses

Which of the following is a common mistake made by companies when assigning costs to segments?

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

Unit Product Cost

Direct Materials + Direct Labor + Variable Manufacturing Overhead

Product Cost

Direct Labor, Variable Manufacturing Overhead

Max, Inc., 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?

$200,000

Contribution Margin Ratio

Contribution Margin/Sales

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. What is the segment margin of the mobile phone division, assuming the traceable fixed costs of the television division are $300,000?

$400,000

Absorption Costing

(Fixed Manufacturing Overhead/Units Produced) + Unit Product Cost

Absorption costing income statements ignore ________.

Variable and fixed cost distinctions

When the units produced are equal to the units sold, net operating income computed using the absorption costing approach is _______ the net operating income computed using the variable costing approach.

equal to

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

less than

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 ________.

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