AC 361 Chapter 6

When a segment is eliminated, a

- common fixed cost will remain unchanged - traceable fixed cost will disappear

Under absorption costing product costs consist of:

both variable and fixed manufacturing costs

Allocating _________fixed costs to a segment may cause an otherwise profitable segment to appear unprofitable.

common

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

fixed manufacturing overhead

Net operating income under absorption costing is generally __________ net operating income under variable costing in periods in which inventory increases.

higher than

When inventory decreases, cost of goods sold under absorption costing will be _________cost of goods sold under variable costing.

more than

Variable costing treats __________ manufacturing costs as product costs.

only variable

Variable costing treats fixed manufacturing overhead as a(n) __________ cost.

period

A company's operations can be divided by product lines, geographical area, manufacturing plants, service centers or sales territories, which are known as __________.

segments

The segment margin equals the segment's contribution margin less the segments __________ fixed costs.

traceable

For external reporting, income statements are generally prepared using __________ costing, and __________ costing is used for internal decision making purposes.

variable absorption