ACCT TEST 2

Under variable costing, an increase in fixed manufacturing overhead will affect the unit product cost.

False

Under variable costing, fixed manufacturing overhead is treated as a product cost.

False

Under variable costing, fixed manufacturing overhead is treated as a product cost. Group starts

False

Which of the following are NOT inventoriable costs under super-variable costing?

Fixed overhead Direct labor (direct materials are)

Absorption costing treats all fixed costs as product costs.

True

Absorption costing treats all manufacturing costs as product costs.

True

Common fixed expenses should not be allocated to business segments when performing break-even calculations and making decisions.

True

If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should be considered a common cost.

True

Under variable costing, all variable production costs are treated as product costs.

True

Under variable costing, only variable production costs are treated as product costs.

True

Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing.

True

Which costs will change with a decrease in activity within the relevant range?

Unit fixed costs and total variable cost.

costs categorized by function

absorption costs

For external reporting, income statements are generally prepared using

absorption or full

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n):

decrease in the unit variable cost.

When inventory increases, absorption costing net operating income is higher than variable costing net income due to the fixed manufacturing overhead

deferred in the inventory account on the balance sheet

Differences in net operating income between super-variable and variable costing occur because of the treatment of ______ costs under the two methods.

direct labor

In a Cost-Volume-Profit graph, the anticipated profit or loss at any given level of sales is measured by the vertical distance between the total revenue line (sales) and the total fixed expense line.

false

On a Cost-Volume-Profit graph for a profitable company, the total expense line will be steeper than the total revenue line.

false

The salary paid to a store manager is not a traceable fixed expense of the store.

false

Absorption costing net operating income may not agree with the net operating income calculated for CVP analysis due to the way in which ______ is handled in absorption costing.

fixed manufacturing overhead

The difference between reported net income on variable costing and absorption costing income statements is based on how

fixed overhead is accounted for

A variable costing income statement

focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs calculates contribution margin while the absorption costing income statement calculates gross margin

Absorption costing can lead managers to mistakenly believe that fixed manufacturing overhead costs will ______ in total as the number of units produced increases.

increase

When allocating fixed manufacturing overhead cost to units under absorption costing, the total fixed overhead costs must be divided by the number of units

produced

Absorption costing treats fixed manufacturing overhead as a

product cost

Assigning common fixed costs to segments impacts ______

segment margin only

Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole?

the product line's segment margin

To prepare a CVP graph, lines must be drawn representing total revenue,

total expense, and total fixed expense

A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products. Group starts

true

Segment margin is sales less variable expenses less traceable fixed expenses.

true

Using absorption costing for segmented income statements can lead to

under-costing of segments omission of upstream and downstream costs

Costs are separated between variable and fixed expenses when using

variable

costing is used for internal decision making purposes

variable , marginal, or direct

The number of units produced does not affect net operating income when using

variable costing

and expensed in full with period costs under

variable costing

costs categorized by behavior

variable costs

Which of the following statements is correct with regard to a Cost-Volume-Profit graph?

A Cost-Volume-Profit graph shows the break-even point as the intersection of the total sales revenue line and the total expense line.

Fixed manufacturing overhead costs are expensed as units sold as part of cost of goods sold under

Absorption costing

All other things the same, if a division's traceable fixed expenses decrease then the division's segment margin will decrease.

False

Allocating common fixed costs to segments on segmented income statements increases the usefulness of such statements.

False

Segmented statements for internal use should not be prepared using the contribution format.

False

CVP Graph - Unit Volume

Horizontal Axis (X)

CVP Graph - Dollars

Vertical Axis (Y)

A fixed cost that supports the operations of more than one segment, but is not traceable in whole or part to any one segment is a(n

common

Variable costing treats Blank______ manufacturing costs as product costs.

only variable

Within the relevant range, variable costs can be expected to:

vary in total in direct proportion to changes in the activity level.