Chapter 6 ACC213
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 _________
Fixed Overhead Costs. Fixed Overhead Costs are only considered with Period Costs in Variable Selling.
True or False? In variable costing, the product costs include fixed MOH.
False. Variable costing DOES NOT include fixed manufacturing overhead costs. It ONLY includes variable MOH (+direct labor/materials).
Period costs in variable costing include...
Fixed MOH, Variable Selling + Admin, Fixed Selling + Admin
A cost that is shared across business segments. Ex) The salary of the CEO of a company.
Common Cost
Absorption Costing Unit Product Cost?
Direct Materials + Direct Labor + Variable MOH+ (Fixed Costs/Units Produced)=
Variable Costing Unit Product Cost?
Direct Materials + Direct Labor + Variable Manufacturing Overhead=
Which does the Segment Margin gage? Long-run or short-run profitability.
Long-run profitability
Which would be the traceable cost? The salary of the CEO of the company and the salary of the phone division's manager salary.
The manager of the phone division's salary. This is because if their job no longer existed, their salary could be traced and removed.
Which would be the common cost? The salary of the CEO of the company and the salary of the phone division's manager salary.
The salary of the CEO. This is because if the manager of the phone division did not exist, the CEO would still be paid.
A cost that arises because of the existence of a segment. Ex) The product manager of Fritos.
Traceable Fixed Cost
True or False? In both Absorption and Variable Costing, Selling + Admin Expenses are treated as Period Costs.
True. Both Fixed and Variable SG&A Expenses are considered Period Costs.
Which costing method states that income increases as sales increase?
Variable Costing
Which of the following costing approaches is best suited for cost-volume-profit analysis?
Variable Costing
Product costs in variable costing include...
Variable MOH, Direct Labor, Direct Materials
