Managerial Acc CH.4

The general guideline is to treat as traceable only those costs that would____over time if the segment was discontinued.

disappear

Contribution margin computed using super-variable costing will be _______ than the contribution margin computed using traditional variable costing.

higher than

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

increase in total

A traceable fixed cost:

is incurred because of the existence of the segment

Costs in absorption costing are separated by

manufacturing and selling and administrative

GAAP and IFRS rules:

require segmented financial data be included in annual reports create problems in reconciling internal and external reports require that the same method be used for both internal and external segment reporting

Using variable costing and the contribution approach for internal decision making:

supports decision making facilitates explaining changes in net income enables CVP analysis

Segment contribution margin equals segment revenue minus the_____expenses for the segment.

variable

Costs in variable costing are separated by

variable and fixed

When preparing a contribution margin income statement:

variable and fixed costs are listed in separate sections of the statement cost of goods sold consists of only variable manufacturing costs

Differences in net operating income between absorption costing and variable costing is due to the:

timing of when fixed manufacturing overhead is expensed

Why is CVP analysis more difficult when using absorption costing than when using variable costing?

CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing

Which of the following costs are considered variable under super-variable costing?

Direct materials

What are inventoriable costs under super-variable costing?

Direct materials Variable overhead

In order to comply with GAAP and IFRS, the ______ costing method must be used for external reporting in the United States.

absorption

The use of____costing can lead to the omission of segment costs because nonmanufacturing costs are not included as costs of a product.

absorption

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

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

Segment break-even calculations include:

both traceable and common fixed expenses

When a segment is eliminated, a:

common fixed cost will remain unchanged traceable fixed cost will disappear

Variable costing income statements are based upon a ________ format.

contribution margin

Incorrectly or arbitrarily assigning common costs to segments:

could reduce the overall profits of the company distorts the profitability of segments holds managers responsible for costs they cannot control

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

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a:

traceable fixed cost to the plant and a common fixed cost for the individual product lines made in the plant

Break-even point in dollar sales:

traceable fixed expenses/cm ratio

The property tax for the store is a(n)____fixed cost for the store, and a(n)____fixed cost for each product line sold in the store.

traceable, common

True or false: Under absorption costing, fixed overhead is treated like a variable cost because a portion of the total cost is allocated to each unit produced, rather than being expensed as one large sum.

true

Using absorption costing for segmented income statements can lead to:

under-costing of segments omission of upstream and downstream costs

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

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

Total fixed costs on a super-variable costing income statement will be _______ than total fixed costs on a traditional variable costing income statement.

higher than

When using absorption costing and explaining changes in operating income, financial statement users need to be aware of changes in____levels.

inventory

Decision-making problems that could occur when using absorption costing include inappropriate ______ decisions, and decisions made to ______ products that are, in fact, profitable.

pricing; drop

An example of a traceable fixed cost for General Motors' Corvette Division is the:

depreciation cost on the equipment used to manufacture the Corvettes

Segmented income statements:

may be prepared for activities at many levels in a company

One mistake companies make when preparing segmented income statements is arbitrarily assigning____fixed costs to segments

untraceable