ScienceEconomicsACCOUNTING #3 Chapter 6 Test Bank
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ACCOUNTING #3 Chapter 6 Test Bank

Guinevere Sanchez avatar Guinevere Sanchez
24 December 2023
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question
Under variable costing, product costs consist of direct materials, direct labor, and variable manufacturing overhead.
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True
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Under absorption costing, fixed manufacturing overhead is treated as a product cost.
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True
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Under variable costing, variable production costs are not treated as product costs.
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False
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Under variable costing, fixed manufacturing overhead cost is not treated as a product cost.
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True
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The costs assigned to units in inventory are typically lower under variable costing than under absorption costing.
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True
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Direct materials is considered to be a product cost under variable costing but not absorption costing.
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False
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Under absorption costing, fixed manufacturing overhead cost is not included in product cost.
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False
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Under variable costing, product cost does not contain any fixed manufacturing overhead cost.
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True
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Under conventional absorption costing, the fixed costs associated with idle production capacity are not included as part of the product cost.
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False
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Under absorption costing, the profit for a period is affected by a change in the number of units of finished goods in inventory.
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True
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When variable costing is used, and if selling prices exceed variable expenses and if the unit contribution margins, the sales mix, and fixed costs remain the same, profits move in the same direction as sales.
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True
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Because absorption costing emphasizes costs by behavior, it works well with cost-volume-profit analysis.
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False
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Net operating income is affected by the number of units produced when absorption costing is used.
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True
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Under absorption costing, it is possible to defer a portion of the fixed manufacturing overhead costs of the current period to future periods through the inventory account.
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True
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When the number of units in work in process and finished goods inventories decrease, absorption costing net operating income will typically be greater than variable costing net operating income.
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False
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A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments
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False
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Common fixed costs should not be charged to the individual segments when preparing a segmented income statement.
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True
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A common fixed cost is a fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated
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False
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Segment margin is a better measure of the long-run profitability of a segment than contribution margin.
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True
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A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Units in beginning inventory 0 Units produced 4,350 Units sold 4,250 Units in ending inventory 100 Variable costs per unit: Direct materials $ 48 Direct labor $ 50 Variable manufacturing overhead $ 13 Variable selling and administrative $ 11 Fixed costs: Fixed manufacturing overhead $ 91,350 Fixed selling and administrative $ 42,500 What is the variable costing unit product cost for the month?
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$111 per unit Direct materials $ 48 Direct labor 50 Variable manufacturing overhead 13 Variable costing unit product cost $ 111
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Bartelt Inc., which produces a single product, has provided the following data for its most recent month of operations: Number of units produced 10,300 Variable costs per unit: Direct materials $90 Direct labor $71 Variable manufacturing overhead $4 Variable selling and administrative expense $12 Fixed costs: Fixed manufacturing overhead $360,500 Fixed selling and administrative expense $813,700 There were no beginning or ending inventories. The absorption costing unit product cost was:
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$200 per unit Direct materials $ 90 Direct labor 71 Variable manufacturing overhead 4 Fixed manufacturing overhead ($360,500 ÷ 10,300 units) 35 Absorption costing unit product cost $ 200
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A company produces a single product. Variable production costs are $13.0 per unit and variable selling and administrative expenses are $4.0 per unit. Fixed manufacturing overhead totals $46,000 and fixed selling and administration expenses total $50,000. Assuming a beginning inventory of zero, production of 5,000 units and sales of 4,100 units, the dollar value of the ending inventory under variable costing would be:
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$11,700 Units in ending inventory = Units in beginning inventory + Units produced − Units sold = 0 units + 5,000 units − 4,100 units = 900 units Value of ending inventory under variable costing = Unit in ending inventory × Variable production cost = 900 units × $13.0 per unit = $11,700
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A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $163 Units in beginning inventory 0 Units produced 10,600 Units sold 9,800 Units in ending inventory 800 Variable costs per unit: Direct materials $52 Direct labor $47 Variable manufacturing overhead $11 Variable selling and administrative $9 Fixed costs: Fixed manufacturing overhead $318,000 Fixed selling and administrative $107,800 What is the total period cost for the month under variable costing?
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$514,000 Variable selling and administrative expense ($9 per unit × 9,800 units sold) $ 88,200 Fixed manufacturing overhead 318,000 Fixed selling and administrative 107,800 Variable costing total period cost $ 514,000
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A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: Selling price $148 Units in beginning inventory 0 Units produced 3,200 Units sold 2,870 Units in ending inventory 330 Variable costs per unit: Direct materials $45 Direct labor $23 Variable manufacturing overhead $7 Variable selling and administrative $19 Fixed costs: Fixed manufacturing overhead $112,000 Fixed selling and administrative expenses $34,440 The total gross margin for the month under absorption costing is:
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$109,060 Direct materials $ 45 Direct labor 23 Variable manufacturing overhead 7 Fixed manufacturing overhead cost ($112,000/3,200 units produced) 35 Absorption costing unit product cost $ 110 Absorption costing income statement: Sales (2,870 units sold × $148 per unit) $ 424,760 Cost of goods sold (2,870 units sold × $110 per unit) 315,700 Gross margin $ 109,060
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Craft Corporation produces a single product. Last year, the company had a net operating income of $86,040 using absorption costing and $75,800 using variable costing. The fixed manufacturing overhead cost was $8 per unit. There were no beginning inventories. If 22,500 units were produced last year, then sales last year were:
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21,220 units Variable costing net operating income $ 75,800 Add fixed manufacturing overhead costs deferred in inventory under absorption costing X Deduct fixed manufacturing overhead costs released from inventory under absorption costing Absorption costing net operating income $ 86,040 Since absorption costing net operating income was greater than its variable costing net operating income by $10,240, it must have deferred $10,240 of fixed manufacturing overhead costs in inventory under absorption costing. Manufacturing overhead deferred in (released from) inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory $10,240 = (Fixed manufacturing overhead per unit × Units in ending inventory) - $0 $10,240 = ($8 per unit × Units in ending inventory) - $0 $10,240 = $8 per unit × Units in ending inventory Units in ending inventory = $10,240 ÷ $8 per unit = 1,280 units Therefore, since there were no beginning inventories and 1,280 units of the 22,500 units that were produced were in ending inventories, sales must have been 21,220 units.
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A company that produces a single product had a net operating income of $88,000 using variable costing and a net operating income of $121,390 using absorption costing. Total fixed manufacturing overhead was $57,630 and production was 11,300 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)
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increased by 6,547 units Variable costing net operating income $ 88,000 Add fixed manufacturing overhead costs deferred in inventory under absorption costing 33,390* Deduct fixed manufacturing overhead costs released from inventory under absorption costing Absorption costing net operating income $ 121,390 *Plug figure Fixed manufacturing overhead per unit = $57,630 ÷ 11,300 units = $5.1 per unit Manufacturing overhead deferred in (released from) inventory = Fixed manufacturing overhead in ending inventory − Fixed manufacturing overhead in beginning inventory $33,390 = ($5.1 per unit × Units in ending inventory) − ($5.1 per unit × Units in beginning inventory) $33,390 = $5.1 per unit × (Units in ending inventory − Units in beginning inventory) (Units in ending inventory − Units in beginning inventory) = $33,390 ÷ $5.1 per unit = 6,547 units
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Brummitt Corporation has two divisions: the BAJ Division and the CBB Division. The corporation's net operating income is $10,900. The BAJ Division's divisional segment margin is $77,100 and the CBB Division's divisional segment margin is $43,100. What is the amount of the common fixed expense not traceable to the individual divisions?
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$109,300 Net operating income = Segment margin − Common fixed expenses $10,900 = ($77,100 +$43,100) − Common fixed expenses $10,900 = $120,200 − Common fixed expenses Common fixed expenses = $120,200 − $10,900 = $109,300
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Koen Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $49,700 for Division A. Division B had a contribution margin ratio of 30% and its sales were $262,000. Net operating income for the company was $33,500 and traceable fixed expenses were $52,500. Koen Corporation's common fixed expenses were:
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$42,300 Total Company Division A Division B Sales $262,000 Variable expenses Contribution margin 49,700 ? Traceable fixed expenses 52,500 Segment margin Common fixed expenses Net operating income $33,500 Division B Contribution margin = Division B CM ratio × Division B Sales = 0.30 × $262,000 = $78,600 Total Company Division A Division B Sales $262,000 Variable expenses Contribution margin ? 49,700 78,600 Traceable fixed expenses 52,500 Segment margin Common fixed expenses Net operating income $33,500 Total contribution margin = Division A contribution margin + Division B contribution margin = $49,700 + $78,600 = $128,300 Total Company Division A Division B Sales $262,000 Variable expenses Contribution margin 128,300 49,700 78,600 Traceable fixed expenses 52,500 Segment margin ? Common fixed expenses Net operating income $33,500 Segment margin = Contribution margin - Traceable fixed expenses = $128,300 - $52,500 = $75,800 Total Company Division A Division B Sales $262,000 Variable expenses Contribution margin 128,300 49,700 78,600 Traceable fixed expenses 52,500 Segment margin 75,800 $49,700 Common fixed expenses ? Net operating income $33,500 Net operating income = Segment margin − Common fixed expenses $33,500 = $75,800 − Common fixed expenses Common fixed expenses = $75,800 − $33,500 = $42,300.
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Quinnett Corporation has two divisions: the Export Products Division and the Business Products Division. The Export Products Division's divisional segment margin is $38,800 and the Business Products Division's divisional segment margin is $91,200. The total amount of common fixed expenses not traceable to the individual divisions is $102,800. What is the company's net operating income?
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$27,200 Total segment margin = $38,800 + $91,200 = $130,000 Total net operating income = Total segment margin - Common fixed expenses = $130,000 - $102,800 = $27,200
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Insider Corporation has two divisions, J and K. During March, the contribution margin in Division J was $44,000. The contribution margin ratio in Division K was 40%, its sales were $139,000, and its segment margin was $46,000. The common fixed expenses in the company were $54,000, and the company's net operating income was $25,000. The segment margin for Division J was:
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$33,000 Total Company Division J Division K Sales $ 139,000 Variable expenses Contribution margin 44,000 Traceable fixed expenses Segment margin ? 46,000 Common fixed expenses 54,000 Net operating income $ 25,000 Net operating income = Total segment margin − Common fixed expenses $25,000 = Total segment margin − $54,000 Total segment margin = $25,000 + $54,000 = $79,000 Total Company Division J Division K Sales $ 139,000 Variable expenses Contribution margin 44,000 Traceable fixed expenses Segment margin 79,000 ? 46,000 Common fixed expenses 54,000 Net operating income $ 25,000 Total segment margin = Division J segment margin + Division K segment margin $79,000 = Division J segment margin + $46,000 Division J segment margin = $79,000 − $46,000 = $33,000
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Sorto Corporation has two divisions: the East Division and the West Division. The corporation's net operating income is $98,100. The East Division's divisional segment margin is $44,400 and the West Division's divisional segment margin is $171,700. What is the amount of the common fixed expense not traceable to the individual divisions?
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$118,000 Total segment margin = $44,400 + $171,700 = $216,100 Total net operating income = Total segment margin − Common fixed expenses $98,100 = $216,100 − Common fixed expenses Common fixed expenses = $216,100 − $98,100 = $118,000
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Gunderman Corporation has two divisions: the Alpha Division and the Charlie Division. The Alpha Division has sales of $290,000, variable expenses of $149,100, and traceable fixed expenses of $69,300. The Charlie Division has sales of $600,000, variable expenses of $331,800, and traceable fixed expenses of $130,300. The total amount of common fixed expenses not traceable to the individual divisions is $131,200. What is the company's net operating income?
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$78,300 Total Company Alpha Charlie Sales $890,000 $290,000 $600,000 Variable expenses 480,900 149,100 331,800 Contribution margin 409,100 140,900 268,200 Traceable fixed expenses 199,600 69,300 130,300 Segment margin 209,500 $71,600 $137,900 Common fixed expenses 131,200 Net operating income $78,300
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DC Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $102,000 annually and one salaried estimator who is paid $56,000 annually. The corporate office has two office administrative assistants who are paid salaries of $60,000 and $42,000 annually. The president's salary is $168,000. How much of these salaries are common fixed expenses?
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$270,000 Office administrative assistant $60,000 Office administrative assistant 42,000 President's salary 168,000 Common fixed expenses $270,000
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Crystal Corporation produces a single product. The company's variable costing income statement for the month of May appears below: Crystal Corporation Income Staement For the month ended May 31 Sales ($22 per unit) $ 954,800 Variable expenses: Variable cost of goods sold 607,600 Variable selling expense 86,800 Total variable expenses 694,400 Contribution margin 260,400 Fixed expenses: Fixed manufacturing overhead 142,800 Fixed selling and administrative 71,400 Total fixed expenses 214,200 Net operating income $ 46,200 The company produced 35,700 units in May and the beginning inventory consisted of 8,370 units. Variable production costs per unit and total fixed costs have remained constant over the past several months. The value of the company's inventory on May 31 under absorption costing would be:
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$12,060 Units sold = $954,800 ÷ $22 per unit = 43,400 units Units in beginning inventory + Units produced = Units sold + Units in ending inventory 8,370 units + 35,700 units = 43,400 units + Units in ending inventory Units in ending inventory = 8,370 units + 35,700 units − 43,400 units = 670 units Variable cost of goods sold ($607,600 ÷ 43,400 units) $ 14 Fixed manufacturing overhead costs ($142,800 ÷ 35,700 units) 4 Absorption costing unit product cost (a) $ 18 Units in ending inventory (b) 670 Value of ending inventory under absorption costing (a) × (b) $ 12,060
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Crystal Corporation produces a single product. The company's variable costing income statement for the month of May appears below: Crystal Corporation Income Statement For the month ending May 31 Sales ($23 per unit) $933,800 Variable expenses: Variable cost of goods sold 609,000 Variable selling expense 121,800 Total variable expenses 730,800 Contribution margin 203,000 Fixed expenses: Fixed manufacturing overhead 142,000 Fixed selling and administrative 35,500 Total fixed expenses 177,500 Net operating income $ 25,500 The company produced 35,500 units in May and the beginning inventory consisted of 8,670 units. Variable production costs per unit and total fixed costs have remained constant over the past several months. Under absorption costing, for May the company would report a:
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$5,100 profit Units in beginning inventory 8,670 Units produced 35,500 Units sold 40,600 Units in ending inventory 3,570 Manufacturing overhead deferred in (released from) inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory Fixed manufacturing 142,000 Units produced 35,500 Per unit 4 Difference in Ending and opening Inventory (5,100) Manufacturing overhead deferred in (released from) inventory (20,400) Variable costing net operating income $25,500 Deduct fixed manufacturing overhead costs released from inventory under absorption costing (20,400) Absorption costing net operating income $5,100 References
question
Hatfield Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $195 Units in beginning inventory 0 Units produced 1,950 Units sold 830 Units in ending inventory 1,120 Variable costs per unit: Direct materials $100 Direct labor $35 Variable manufacturing overhead $4 Variable selling and administrative $15 Fixed costs: Fixed manufacturing overhead $25,350 Fixed selling and administrative $11,620 What is the total period cost for the month under the variable costing?
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$49,420 Variable selling and administrative expense ($15 per unit × 830 units sold) $12,450 Fixed manufacturing overhead 25,350 Fixed selling and administrative 11,620 Total $49,420
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Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $140 Units in beginning inventory 0 Units produced 9,300 Units sold 8,900 Units in ending inventory 400 Variable costs per unit: Direct materials $25 Direct labor $67 Variable manufacturing overhead $13 Variable selling and administrative $17 Fixed costs: Fixed manufacturing overhead $139,500 Fixed selling and administrative $9,500 What is the net operating income for the month under variable costing?
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$11,200 Direct materials $25 Direct labor 67 Variable manufacturing overhead 13 Variable costing unit product cost $105 Sales ($140 per unit × 8,900 units) $1,246,000 Variable expenses: Variable cost of goods sold ($105 per unit × 8,900 units) $934,500 Variable selling and administrative ($17 per unit × 8,900 units) 151,300 1,085,800 Contribution margin 160,200 Fixed expenses: Fixed manufacturing overhead 139,500 Fixed selling and administrative 9,500 149,000 Net operating income $11,200
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Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $152 Units in beginning inventory 0 Units produced 9,450 Units sold 9,050 Units in ending inventory 400 Variable costs per unit: Direct materials $28 Direct labor $70 Variable manufacturing overhead $16 Variable selling and administrative $20 Fixed costs: Fixed manufacturing overhead $141,750 Fixed selling and administrative $9,800 What is the net operating income for the month under absorption costing?
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$17,350 Direct materials $28 Direct labor 70 Variable manufacturing overhead 16 Fixed manufacturing overhead cost ($141,750 ÷ 9,450 units produced) 15 Absorption costing unit product cost $129 Sales ($152 per unit × 9,050 units) $1,375,600 Cost of goods sold ($129 per unit × 9,050 units) 1,167,450 Gross margin 208,150 Selling and administrative expenses ($20 per unit × 9,050 units + $9,800) 190,800 Net operating income $17,350
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Khanam Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $137 Units in beginning inventory 0 Units produced 8,900 Units sold 9,000 Units in ending inventory 900 Variable costs per unit: Direct materials $30 Direct labor $47 Variable manufacturing overhead $11 Variable selling and administrative $21 Fixed costs: Fixed manufacturing overhead $71,200 Fixed selling and administrative $164,500 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under variable costing?
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$16,300 Direct materials $30 Direct labor 47 Variable manufacturing overhead 11 Variable costing unit product cost $88 Sales ($137 per unit × 9,000 units) $1,233,000 Variable expenses: Variable cost of goods sold ($88 per unit × 9,000 units) $792,000 Variable selling and administrative ($21 per unit × 9,000 units) 189,000 981,000 Contribution margin 252,000 Fixed expenses: Fixed manufacturing overhead 71,200 Fixed selling and administrative 164,500 235,700 Net operating income $16,300
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Khanam Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $101 Units in beginning inventory 0 Units produced 8,450 Units sold 8,550 Units in ending inventory 450 Variable costs per unit: Direct materials $21 Direct labor $38 Variable manufacturing overhead $2 Variable selling and administrative $12 Fixed costs: Fixed manufacturing overhead $67,600 Fixed selling and administrative $161,800 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the net operating income for the month under absorption costing?
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$9,200 Direct materials $21 Direct labor 38 Variable manufacturing overhead 2 Fixed manufacturing overhead cost ($67,600 ÷ 8,450 units produced) 8 Absorption costing unit product cost $69 Sales ($101 per unit × 8,550 units) $863,550 Cost of goods sold ($69 per unit × 8,550 units) 589,950 Gross margin 273,600 Selling and administrative expenses ($12 per unit × 8,550 units + $161,800) 264,400 Net operating income $9,200
question
Aaker Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $171 Units in beginning inventory 0 Units produced 7,200 Units sold 6,900 Units in ending inventory 300 Variable costs per unit: Direct materials $30 Direct labor $60 Variable manufacturing overhead $24 Variable selling and administrative $24 Fixed costs: Fixed manufacturing overhead $194,400 Fixed selling and administrative $29,400 What is the unit product cost for the month under variable costing?
answer
$114 per units Direct materials $30 Direct labor 60 Variable manufacturing overhead 24 Variable costing unit product cost $114
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Khanam Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $107 Units in beginning inventory 0 Units produced 6,400 Units sold 6,100 Units in ending inventory 300 Variable costs per unit: Direct materials $14 Direct labor $44 Variable manufacturing overhead $8 Variable selling and administrative $8 Fixed costs: Fixed manufacturing overhead $172,800 Fixed selling and administrative $24,600 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. What is the unit product cost for the month under absorption costing?
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$93 per unit Direct materials $14 Direct labor 44 Variable manufacturing overhead 8 Fixed manufacturing overhead cost ($172,800 ÷ 6,400 units produced) 27 Absorption costing unit product cost $93
question
Harris Corporation produces a single product. Last year, Harris manufactured 27,540 units and sold 22,200 units. Production costs for the year were as follows: Fixed manufacturing overhead $302,940 Variable manufacturing overhead $239,598 Direct labor $121,176 Direct materials $214,812 Sales were $1,098,900, for the year, variable selling and administrative expenses were $115,440, and fixed selling and administrative expenses were $176,256. There was no beginning inventory. Assume that direct labor is a variable cost. Under absorption costing, the ending inventory for the year would be valued at: (Do not round intermediate calculations.)
answer
$170,346 Units in ending inventory = Units in beginning inventory + Units produced - Units sold = 0 +27,540 units - 22,200 units = 5,340 units Unit Direct materials ($214,812 ÷ 27,540 units produced) $7.80 Direct labor ($121,176 ÷ 27,540 units produced) 4.40 Variable manufacturing overhead ($239,598 ÷ 27,540 units produced) 8.70 Fixed manufacturing overhead cost ($302,940 ÷ 27,540 units produced) 11 Absorption costing unit product cost (a) $31.90 Units in ending inventory (b) 5,340 Value of ending inventory under absorption costing (a) × (b) $170,346
question
Harris Corporation produces a single product. Last year, Harris manufactured 31,770 units and sold 26,400 units. Production costs for the year were as follows: Fixed manufacturing overhead $508,320 Variable manufacturing overhead $247,806 Direct labor $142,965 Direct materials $228,744 Sales were $1,161,600, for the year, variable selling and administrative expenses were $139,920, and fixed selling and administrative expenses were $225,567. There was no beginning inventory. Assume that direct labor is a variable cost. Under variable costing, the company's net operating income for the year would be:
answer
$85,920 lower than under absorption costing Units in ending inventory = Units in beginning inventory + Units produced - Units sold = 0 units + 31,770 units − 26,400 units = 5,370 unit Fixed manufacturing overhead per unit = Fixed manufacturing overhead ÷ Units produced = $508,320 ÷ 31,770 units = $16 per unit Manufacturing overhead deferred in (released from) inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory = $16 per unit × 5,370 units = $85,920 Therefore, variable costing net operating income will be $85,920 lower than absorption costing net operating income.
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Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $250,000, variable expenses of $140,000, and traceable fixed expenses of $32,000. During the same month, the West business segment had sales revenues of $920,000, variable expenses of $484,000, and traceable fixed expenses of $175,000. The common fixed expenses totaled $258,000 and were allocated as follows: $129,000 to the East business segment and $129,000 to the West business segment. A properly constructed segmented income statement in a contribution format would show that the segment margin of the East business segment is:
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$78,000 West Sales $250,000 Variable expenses 140,000 Contribution margin $110,000 Traceable fixed expenses 32,000 Segment margin $78,000
question
Nantua Corporation has two divisions, Southern and Northern. The following information was taken from last year's income statement segmented by division: Total Company Southern Northern Sales $5,300,000 $3,280,000 $2,020,000 Contribution margin $2,300,000 $1,440,000 $860,000 Divisional segment margin $1,240,000 $960,000 $280,000 Net operating income last year for Nantua Corporation was $530,000. In last year's income statement segmented by division, what were Nantua's total common fixed expenses?
answer
$710,000 Net operating income = Total segment margin - Common fixed expenses $530,000 = $1,240,000 - Common fixed expenses Common fixed expenses = $1,240,000 - $530,000 = $710,000
question
O'Neill, Incorporated's segmented income statement for the most recent month is given below. Total Store A Store B Sales $162,400 $68,000 $94,400 Variable expenses 57,448 31,960 25,488 Contribution margin 104,952 36,040 68,912 Traceable fixed expenses 75,300 23,800 51,500 Segment margin 29,652 $12,240 $17,412 Common fixed expenses 15,000 Net operating income $ 14,652 If Store B sales increase by $40,500 with no change in fixed expenses, the overall company net operating income should:
answer
increase by $29,565 Store B CM ratio = Contribution margin ÷ Sales = $68,912 ÷ $94,400 = .73 Change in contribution margin = CM ratio × Change in sales = .73 × $40,500 = $29,565 Fixed expenses are not affected, so the $29,565. increase in contribution margin should increase net operating income by $29,565.
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Variable manufacturing overhead a Yes b No c Yes d No Fixed manufacturing overhead a Yes b No c No d Yes
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option A
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Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing? Variable manufacturing overhead Variable selling and administrative expense Yes Yes Yes No No Yes No No
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option b
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The principal difference between variable costing and absorption costing centers on:
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whether fixed manufacturing costs should be included in product costs.
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Under absorption costing, fixed manufacturing overhead costs:
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are deferred in inventory when production exceeds sales.
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Under variable costing, fixed manufacturing overhead is:
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expensed as a period cost.
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Under variable costing, which of the following is not expensed in its entirety in the period in which it is incurred?
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variable manufacturing overhead cost
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George Corporation has no beginning inventory and manufactures a single product. If the number of units produced exceeds the number of units sold, then net operating income under the absorption method for the year will:
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be greater than the net operating income under variable costing.
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If a cost is a common cost of the segments on a segmented income statement, the cost should:
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not be allocated to the segments.
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A national retail company has segmented its income statement by sales territories. If each sales territory statement is further segmented by individual stores, which of the following will most likely occur?
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some traceable fixed expenses in the sales territory segmented statement will become common fixed expenses in the individual store segmented statement.