accounting 3 chapter 5

What is the unit product cost for the month of February, using the variable costing method?

52000

When we reconcile variable costing with absorption costing income, which costs must be considered?

Fixed manufacturing overhead

Even when a manager is able to adjust the size of its labor force, the manager may view it as a fixed cost because

MAY HURT MORALE TO TREAT IT AS A VARIABLE COST

What is the break-even point for the Parcel Corporation as a whole?

PERIOD

Assume that variable costing is used to determine product costs

Product Costs -direct labor -direct material -variable manufacturing overhead period costs -fixed selling and administrative expenses -fixed manufacturing overhead -variable selling and administrative expenses

When units produced are equal to units sold, the absorption costing net operating income is _____ drop item here the variable costing net operating income.

greater than

When units produced exceed the units sold, the absorption costing net operating income is _____ the variable costing net operating income.

less than

The use of absorption costing for segmented income statements results in:

omission of upstream and downstream costs.

investors return

DE

In absorption costing, fixed manufacturing overhead is recorded as a product cost.

true

The contribution approach income statement can be used for cost-volume-profit analysis because costs are separated as fixed and variable.

true

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 Sales of $500,000 x 60% contribution margin = $300,000 contribution margin; $300,000 contribution margin minus $100,000 traceable fixed expenses = segment margin of $200,000.

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

What is the unit product cost for the month of February, using the absorption costing method?

$80,000

What is the company's contribution margin?

Contribution margin = $13,200. This is calculated as: Sales ($40,000) minus variable cost of goods sold (direct materials + direct labor + variable manufacturing cost = $60 per unit cost x 400 units manufactured = 24,000) minus variable selling and administrative expenses ($7 per unit x 400 units = $2,800).

Super-variable costing treats direct labor as a drop item here _________ cost.

DIRECT LABOR COST

How much is the cost of goods sold under the absorption method?

DM + DL + Variable manufacturing cost + fixed manufacturing OH (fixed MOH/units produced) = per unit cost. $32,000 Cost of goods sold = $30 direct materials + $20 direct labor + $10 variable manufacturing cost + $20 fixed manufacturing overhead ($10,000 fixed manufacturing overhead/500 units produced) = $80 per unit cost. $80 x 400 units sold = $32,000.

Which of the following is an example of a common fixed cost?

Salary of the CEO of Apple, Inc. A common fixed cost is a fixed cost that supports the operations of more than one segment, but is not traceable in whole or in part to any one segment. Even if a segment were entirely eliminated, there would be no change in a true common fixed cost. The salary of the CEO of Apple, Inc. is a true common fixed cost.

What is the break-even point for the International Division?

Segment break-even point = Traceable fixed expenses of $352,000 ÷ Segment contributionmargin ratio of 80% ($640,000 ÷ $800,000) = $440,000

What is the break-even point for the American Division?

Segment break-even point = Traceable fixed expenses of $360,000 ÷ Segment contributionmargin ratio of 60% ($432,000 ÷ $720,000) = $600,000

In an absorption costing income statement, in addition to direct materials and direct labor, cost of goods sold also includes:

Variable manufacturing overhead and fixed manufacturing overhead Variable costing income statements categorize costs according to behavior (variable versus fixed). Absorption costing income statements categorize costs by function (manufacturing versus selling and administrative).

The variable costing contribution format income statement categorizes costs based on their function.

false

When the units produced during a period are less than the units sold, the absorption costing net operating income will be more than the variable costing net operating income.

false

A true common fixed cost would disappear if a segment was entirely eliminated.

false Even if a segment were entirely eliminated, there would be no change in a true common fixed cost.