ACC-208 CHAPTER 6

Under variable costing, the cost of a unit of inventory does NOT contain

Fixed manu overhead

Pearls, pearls, Pearls! manufactures and sells jewelry. The total variable cost of goods sold this month is $72,490. Var selling + admin cost is $22 per unit sold. If 350 units are produced and 314 units are sold this month, the total variable cost reported on the income statement for the month is $ ____________

Total variable cost = $72,490(COGS) + $22(per unit sold) x 314 (units produced) = $79,398

Company manufactures baseball gloves. Each glove requires $22 of DM and $18 of DL. Variable manufacturing overhead cost is $7 per unit and fixed manufacturing overhead cost is $19,000 in total. Variable selling + administrative costs are $11 per unit sold and fixed selling and administrative costs are $13200. Last period, 800 gloves were produced, and 585 gloves were sold. The unit product cost using variable costing is:

Unit product cost = $22(DM) + $18(DL) + 7(Var. Manu. Ov) = $47

Direct costing or marginal costing are other terms for______ costing

Variable

Which of the following approaches may be used internally by manufacturing companies for costing products for the purposes of valuing inventory and cost of goods sold?

Variable and Absorption costing

Common mistakes made by companies when assigning costs to segments include:

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

segment break-even calculations include:

only traceable fixed expenses

Variable costing treats ______ manufacturing costs as product costs.

only variable

When a segment cannot cover its own costs, that segment should:

probably be dropped

The segment margin is a valuable tool for assessing the long-run _______ of a segment

profitability

Absorption costing is:

required by GAAP + IFRS

Construct a contribution format income statement

sales variable exp contribution margin fixed expenses net operating income

Absorption costing

separates product (manufacturing) costs from period ( S + A ) costs

Granny's Touch Manufactures and sells cookbooks. The company's variable cost of goods sold is $39,200 and variable selling and administrative expense is $6,200. Fixed manufacturing overhead is $19,700 and fixed selling + administrative expense is $9,290. An income statement prepared using variable costing shows $_______ as the total fixed expenses.

total fixed expenses = $19,700(Fixed Manu. Ov) + $9,290(Fixed selling + admin) = $29,990

The segment margin ='s the segment's contribution margin less the segment's _________ fixed costs.

traceable

When computing a segment margin, only _______ fixed costs are changed to the particular segment.

traceable

Product costs under absorption costing are:

DL DM Fixed manu. ov Variable manu. ov

Which of the following costs make up the manufacturing cost per unit of a product under variable costing?

DM DL VMO

When inventory increases, which costing method generally results in higher net operating income?

absorption costing

Fixed manu overhead costs are expressed as units are sold as part of cost of goods sold under __________

absorption costing and variable costing

When using variable costing, fixed manufacturing overhead is:

expensed in the period incurred

Citrus Scents produces body sprays. Each bottle has a unit product cost of $5.38. The company produced 1,490 bottles this month and sold 1,203 of those bottles. Total COGS was:

$5.38(unit product cost) x 1,203(sold) = $6,472.14

When preparing a contribution margin income statement

- COGS consists of only variable manufacturing costs - variable and fixed costs are listed in separate sections of the statement

When should a segment be discontinued?

- When the segment contribution margin doesn't cover the traceable fixed costs - When the segment margin is negative

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 for the store is a(n) traceable fixed cost for the store, and a(n) common fixed cost for each product line sold in the store.

?????

Contrast the way fixed manufacturing overhead costs are treated in absorption costing versus variable costing

Absorption - fixed manufacturing overhead is treated as part of the per unit product cost and expensed as units are sold. Variable costing - fixed manufacturing overhead is treated as a period cost and expensed in full each period

The unit product cost of a blender is $24. If 900 blenders are produced and 849 blenders are sold, the total COGS is $________

COGS = 849(prodced) x $24(unit product cost) =

Under absorption costing, fixed manu ov accumulates in which accounts until units of product are sold?

Inventory on bal sheet

The segment margin represents the:

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

Construct an income statement using absorption costing

Sales - Total COGS = GM - Total S + A costs = Net Operating income

Variable costing

deducts all variable expenses from sales to determine contribution margin and all fixed expenses from contribution margin to determine income or loss.

the number of units produced does not affect net operating income when using ______ costing

variable