Week 5 ACCT

Discontinuing a profitable segment results in

- a reduction in overall profits of the company - the loss of the segment's revenue

A segment should be discontinued when the segment

- cannot cover its own costs - has a contribution margin that cannot cover traceable fixed costs

which of the fallowing statements are correct? - treating direct labor as a variable cost improves decision making - employee morale may be reduced when direct labor is treated as a variable cost - in practice, direct labor costs are really fixed - managers generally have the ability to quickly adjust the direct labor force

- employee morale may be reduced when direct labor is treated as a variable cost - in practice, direct labor costs are really fixed

Incorrectly or arbitrarily assigning common costs to segments:

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

Absorption costing and variable costing net operating income will be equal when:

- the number of units produced equals the number of units sold - there is no beginning and no ending inventory

What are common mistakes made by companies when assigning costs to segments include:

= arbitrarlly allocating common fixed costs = inapproprieately assigning traceable fixed costs = omitting costs that should be included

_____________ costing income statements ignore variable and fixed cost distinctions.

Absorption

_______________costing allocates a portion of fixed manufacturing overhead cost to each unit of product along with the variable manufacturing costs.

Absorption

Absorption costing includes all of what in its product costs

Manufacturing costs

??????= direct materials + direct labor + variable manufacturing overhead

Variable costing unit produced

_______ costing separates costs between products and periods

absorption

_________ costing treats all manufacturing costs as a product costs, regardless of whether they are variable or fixed.

absorption

- Used by most companies for both internal and external reports - required by GAAP and IFRS

absorption costing

Fixed manufacturing overhead costs are included as part of WIP inventory under:

absorption costing only

How are the variable costing and absorption costing different

account for fixed manufacturing costing differently

common fixed costs

arise because of the overall operation of the company and would not disappear if any particular segment were eliminated

Allocating _ _____ fixed costs to a segment may cause an otherwise profitable segment to appear unprofitable

common

If a segment is eliminated, ___________ fixed costs that are not traced to the segment will not change

common

Variable costing income statements rely on

contribution format for internal decision making purposes

Traceable fixed costs

costs that would disappear over time if the segement itself disappered

Differences in net operating income between super-variable costing occur bc of the treatment of _____ costs under the two methods

direct labor

super - variable costing treats ______ ____ as a fixed period expense whereas variable costing treats direct labor as a ______ product cost

direct labor, variable

What is considered variable under super -variable costin

direct materials

which of the fallowing are inventoriable costs under super-variable costing? -direct materials - direct labor - fixed overhead - variable overhead

direct materials direct labor

Variable costing is sometimes referred to as _______ costing or _______ costing

direct, marginal

On an absoption costing come statement, selling and admin expese are

equal the amt reported on a variable costing income statement are reported as a single amt

super-variable costing will have lower net operating income than variable costing when units produced :

exceed units sold

Absorbtion costing income statements used for

external reporting

Absorption and variable costing net income are usually different due to the accounting for;

fixed manufacturing overhead

Under variable costing the cost of a unit of inventory does NOT contain

fixed manufacturing overhead

When units produced exceed units sold, net income will generally be:

higher under absorption costing that under variable costing

variable costing net operating income for each period can always be computed by _________ the number of units sold by the contribution margin per unit and then ________ total fixed expense

multiplying, subtracting

Variable and absorbtion costing differ quite large with

net income

selling and admin expenses are ______ treated as product costs

never

selling and administrative expenses are always treated as a

period cost

under absorption and variable costing, variable and fixed selling and administrative expenses are always treated as _______ costs and are reported as expenses on the _________ statement as incurred.

period, income

both income statement formats include ________ costs and ________ costs, although they define these cost classifications differently

product , period

The segment margin is a valuable tool for assessing the long-run ___________ of a segment

profitabilty

is a part or activity of an organization about which managers would like cost, revenue, or profit data.

segment

From a decision making point of view, ________ margin is most useful for major capacity decisions and _______ margin is most useful for short-term sales volume decisions

segment, contribution

If a segment cannot cover its own costs then the segment

should be deleted

Bart's inc operates retail stores in various cities. Segmented income statements are prepared for each store and for each product line in each store. The property tax for the store is a __________ fixed cost for the store and a ________ fixed cost for each product line sold in the store.

traceable, common

When using absorption costing, the fixed manufacturing cost per unit = total fixed manufacturing overhead divided buy;

units produced

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

variable

When using ______ costing costs are separated between variable and fixed expenses

variable

_________ costing income statements are grounded in the contribution format. They categorize expenses based on cost behavior—variable expenses are reported separately from fixed expenses.

variable

In which costing is fixed manufacturing cost treated as a period cost along with selling and administrative expenses, and is reported as an expense on the income statement in its entirety each period

variable costing

What costing describes this : only those manufacturing costs that vary with output are treated as product costs

variable costing

which of the fallowing are inventoriable costs under super variable costing?

variable overhead direct materials