ACCT 2123 TEST 2 concept videos

What is usually plotted as a horizontal line on the CVP graph?

fixed expenses

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.

greater than

Under variable costing, only those manufacturing costs that vary with output are treated as product costs. Fixed manufacturing overhead is treated as a

period cost

Note that under both approaches (that is, variable and absorption costing) fixed selling and administrative expenses are treated as _____ and are expensed as incurred.

period costs

Contribution margin

the amount remaining from sales revenue after variable expenses are deducted.

Variable and fixed cost distinctions

Absorption costing income statements ignore

The profit graph is based on the following linear equation:

Profit = Unit CM × Q - Fixed Expenses

Fixed overhead costs

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 ________.

Operating Leverage

The measure of how sensitive net operating income is to a given percentage change in volume sales is called

Which of the following statements about the segment margin is not true? In preparing a segmented income statement, the variable expenses are deducted from sales to yield the contribution margin for each segment. The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin. The segment margin represents the margin available after a segment has covered all of its own costs. 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.

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

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

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

Once the break-even point has been reached, net operating income will increase by the amount of the _____ for each additional unit sold.

Unit CM

Less than absorption costing net operating income

When the number of units produced is greater than the number of units sold, variable costing net operating income will be

With regards to interpretation, what are the important areas that appear on a CVP graph?

break-even point, loss area, and profit area

A shift in the sales mix from high-margin items to low-margin items can cause total profit to

decrease

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.

less than

Break-even point is the level of sales at which

total revenue equals total costs

What is represented on the X axis of a cost-volume-profit (CVP) graph?

unit volume

Which of the following costing approaches is best suited for cost-volume-profit analysis?

variable

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.

equal to

Note that under both approaches (that is, variable and absorption costing) variable selling and administrative expenses are treated as _______ and are expensed as incurred.

period costs

Under variable costing, those manufacturing costs that vary with output, such as direct labor, are treated as

product costs

Under variable costing, those manufacturing costs that vary with output, such as variable manufacturing overhead, are treated as

product costs