Deck 5: Variable Costing and Segment Reporting: Tools for Management

Question 1

The unit product cost under absorption costing does not include fixed manufacturing overhead cost.

Answer 1

False

Question 2

Absorption costing is more compatible with cost-volume-profit analysis than is variable costing.

Answer 2

False

Question 3

When production is less than sales for the period,absorption costing net operating income will generally be less than variable costing net operating income.

Answer 3

True

Question 4

The contribution margin tells us what happens to profits as volume changes if a segment's capacity and fixed costs change as well.

Question 5

Contribution margin and segment margin mean the same thing.

Question 6

Only those costs that would disappear over time if a segment were eliminated should be considered traceable costs of the segment.

Question 7

Routsong Company had the following sales and production data for the past four years: Selling price per unit,variable cost per unit,and total fixed cost are the same in each year.Which of the following statements is not correct?

A)Under variable costing,net operating income for Year 1 and Year 2 would be the same.
B)Because of the changes in production levels,under variable costing the unit product cost will change each year.
C)The total net operating income for all four years combined would be the same under variable and absorption costing.
D)Under absorption costing,net operating income in Year 4 would be less than the net operating income in Year 2.

Question 8

A segment is any portion or activity of an organization about which a manager seeks revenue,cost,or profit data.

Question 9

The salary paid to a store manager is a traceable fixed expense of the store.

Question 10

The salary of the treasurer of a corporation is an example of a common cost which normally cannot be traced to product segments.

Question 11

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

Question 12

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

Question 13

In responsibility accounting,each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs.

Question 14

Segmented statements for internal use should be prepared in the contribution format.

Question 15

Fixed costs that are traceable to a segment may become common if the segment is divided into smaller units.

Question 16

The contribution margin is viewed as a better gauge of the long run profitability of a segment than the segment margin.

Question 17

When reconciling variable costing and absorption costing net operating income,fixed manufacturing overhead costs deferred in inventory under absorption costing should be added to variable costing net operating income to arrive at the absorption costing net operating income.

Question 18

Assuming that a segment has both variable expenses and traceable fixed expenses,an increase in sales should increase profits by an amount equal to the sales times the segment margin ratio.

Question 19

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

Question 20

In segment reporting,sales dollars is usually an appropriate allocation base for selling,general,and administrative expenses.

Question 21

If the number of units produced exceeds the number of units sold,then net operating income under absorption costing will:

A)be equal to the net operating income under variable costing.
B)be greater than net operating income under variable costing.
C)be equal to the net operating income under variable costing plus total fixed manufacturing costs.
D)be equal to the net operating income under variable costing less total fixed manufacturing costs.

Question 22

Which of the following are considered to be product costs under variable costing?
I.Variable manufacturing overhead.
II)Fixed manufacturing overhead.
III)Selling and administrative expenses.

A)I.
B)I and II.
C)I and III.
D)I,II,and III.

Question 23

Under variable costing,costs that are treated as period costs include:

A)only fixed manufacturing costs.
B)both variable and fixed manufacturing costs.
C)all fixed costs.
D)only fixed selling and administrative costs.

Question 24

A common cost that should not be assigned to a particular product on a segmented income statement is:

A)the product's advertising costs.
B)the salary of the corporation president.
C)direct materials costs.
D)the product manager's salary.

Question 25

Selling and administrative expenses are considered to be:

A)a product cost under variable costing.
B)a product cost under absorption costing.
C)part of fixed manufacturing overhead under variable costing.
D)a period cost under variable costing.

Question 26

Gangwer Corporation produces a single product and has the following cost structure: The absorption costing unit product cost is:

A)$95
B)$119
C)$61
D)$56

Question 27

Which of the following are considered to be product costs under absorption costing?
I.Variable manufacturing overhead.
II)Fixed manufacturing overhead.
III)Selling and administrative expenses.

A)I,II,and III.
B)I and II.
C)I and III.
D)I.

Question 28

Net operating income reported under absorption costing will exceed net operating income reported under variable costing for a given period if:

A)production equals sales for that period.
B)production exceeds sales for that period.
C)sales exceed production for that period.
D)the variable manufacturing overhead exceeds the fixed manufacturing overhead.

Question 29

In an income statement segmented by product line,a fixed expense that cannot be allocated among product lines on a cause-and-effect basis should be:

A)classified as a traceable fixed expense and not allocated.
B)allocated to the product lines on the basis of sales dollars.
C)allocated to the product lines on the basis of segment margin.
D)classified as a common fixed expense and not allocated.

Question 30

Segment margin is sales minus:

A)variable expenses.
B)traceable fixed expenses.
C)variable expenses and common fixed expenses.
D)variable expenses and traceable fixed expenses.

Question 31

Fixed manufacturing overhead is included in product costs under:

A)Option A
B)Option B
C)Option C
D)Option D

Question 32

Dull Corporation has been producing and selling electric razors for the past ten years.Shown below are the actual net operating incomes for the last three years of operations at Dull: Dull Corporation's cost structure and selling price has not changed during its ten years of operations.Based on the information presented above,which of the following statements is true?

A)Dull Corporation operated above the breakeven point in each of the three years presented.
B)For the three years presented in total,Dull Corporation sold more units than it produced.
C)In Year 10,Dull Corporation produced fewer units than it sold.
D)In Year 9,Dull Corporation produced more units than it sold.

Question 33

Olds Inc. ,which produces a single product,has provided the following data for its most recent month of operations: There were no beginning or ending inventories.The absorption costing unit product cost was:

A)$97
B)$130
C)$99
D)$207

Question 34

Would the following costs be classified as product or period costs under variable costing at a retail clothing store?

A)Option A
B)Option B
C)Option C
D)Option D

Question 35

Clayton Company produces a single product.Last year,the company's variable production costs totaled $8,000 and its fixed manufacturing overhead costs totaled $4,800.The company produced 4,000 units during the year and sold 3,600 units.Assuming no units in the beginning inventory:

A)under variable costing,the units in ending inventory will be costed at $3.20 each.
B)the net operating income under absorption costing for the year will be $480 lower than net operating income under variable costing.
C)the ending inventory under variable costing will be $480 lower than the ending inventory under absorption costing.
D)the net operating income under absorption costing for the year will be $800 lower than net operating income under variable costing.

Question 36

All other things being equal,if a division's traceable fixed expenses increase:

A)the division's contribution margin ratio will decrease.
B)the division's segment margin ratio will remain the same.
C)the division's segment margin will decrease.
D)the overall company profit will remain the same.

Question 37

A portion of the total fixed manufacturing overhead cost incurred during a period may:

A)be excluded from cost of goods sold under absorption costing.
B)be charged as a period cost with the remainder deferred under variable costing.
C)never be excluded from cost of goods sold under absorption costing.
D)never be excluded from cost of goods sold under variable costing.

Question 38

Over an extended period of time in which the final ending inventories are zero,the accumulated net operating income figures reported under absorption costing will be:

A)greater than those reported under variable costing.
B)less than those reported under variable costing.
C)the same as those reported under variable costing.
D)higher or lower since no generalization can be made.

Question 39

A company using lean production methods likely would show approximately the same net operating income under both absorption and variable costing because:

A)ending inventory would be valued in the same manner for both methods under lean production.
B)production is geared to sales under lean production and thus there would be little or no ending inventory.
C)under lean production fixed manufacturing overhead costs are charged to the period incurred rather than to the product produced.
D)there is no distinction made under lean production between fixed and variable costs.

Question 40

All other things equal,if a division's traceable fixed expenses decrease:

A)the division's segment margin will increase.
B)the overall company net operating income will decrease.
C)the division's contribution margin will increase.
D)the division's sales volume will increase.

Question 41

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the total period cost for the month under variable costing?

A)$185,000
B)$117,600
C)$273,200
D)$302,600

Question 42

Roy Corporation produces a single product.During July,Roy produced 10,000 units.Costs incurred during the month were as follows: Under absorption costing,any unsold units would be carried in the inventory account at a unit product cost of:

A)$5.10
B)$4.40
C)$3.80
D)$3.50

Question 43

Evans Company produces a single product.During the most recent year,the company had a net operating income of $90,000 using absorption costing and $84,000 using variable costing.The fixed overhead application rate was $6 per unit.There were no beginning inventories.If 22,000 units were produced last year,then sales for last year were:

A)15,000 units
B)21,000 units
C)23,000 units
D)28,000 units

Question 44

Sproles Inc.manufactures a variety of products.Variable costing net operating income was $90,500 last year and its inventory decreased by 3,500 units.Fixed manufacturing overhead cost was $6 per unit.What was the absorption costing net operating income last year?

A)$90,500
B)$21,000
C)$69,500
D)$111,500

Question 45

Roberts Company produces a single product.This year,the company's net operating income under absorption costing was $2,000 lower than under variable costing.The company sold 8,000 units during the year,and its variable costs were $8 per unit,of which $2 was variable selling and administrative expense.If production cost was $10 per unit under absorption costing,then how many units did the company produce during the year? (The company produced the same number of units last year. )

A)7,500 units
B)7,000 units
C)9,000 units
D)8,500 units

Question 46

Moore Company produces a single product.During last year,Moore's variable production costs totaled $10,000 and its fixed manufacturing overhead costs totaled $6,800.The company produced 5,000 units during the year and sold 4,600 units.There were no units in the beginning inventory.Which of the following statements is true?

A)The net operating income under absorption costing for the year will be $800 higher than net operating income under variable costing.
B)The net operating income under absorption costing for the year will be $544 higher than net operating income under variable costing.
C)The net operating income under absorption costing for the year will be $544 lower than net operating income under variable costing.
D)The net operating income under absorption costing for the year will be $800 lower than net operating income under variable costing.

Question 47

Swiatek Corporation produces a single product and has the following cost structure: The variable costing unit product cost is:

A)$161
B)$225
C)$153
D)$158

Question 48

Last year,Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory decreased by 600 units.Fixed manufacturing overhead cost was $1 per unit.What was the absorption costing net operating income last year?

A)$64,200
B)$63,000
C)$63,600
D)$600

Question 49

A company produces a single product.Last year,fixed manufacturing overhead was $30,000,variable production costs were $48,000,fixed selling and administration costs were $20,000,and variable selling administrative expenses were $9,600.There was no beginning inventory.During the year,3,000 units were produced and 2,400 units were sold at a price of $40 per unit.Under variable costing,net operating income would be:

A)a profit of $6,000.
B)a profit of $4,000.
C)a loss of $2,000.
D)a loss of $4,400.

Question 50

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total gross margin for the month under absorption costing is:

A)$42,000
B)$14,700
C)$69,000
D)$79,800

Question 51

Cockriel Inc. ,which produces a single product,has provided the following data for its most recent month of operations: There were no beginning or ending inventories.The variable costing unit product cost was:

A)$42
B)$43
C)$37
D)$48

Question 52

Tsuchiya Corporation manufactures a variety of products.Last year,the company's variable costing net operating income was $57,500.Fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $35,400.What was the absorption costing net operating income last year?

A)$22,100
B)$35,400
C)$57,500
D)$92,900

Question 53

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the variable costing unit product cost for the month?

A)$103
B)$99
C)$94
D)$90

Question 54

Craft Company produces a single product.Last year,the company had a net operating income of $80,000 using absorption costing and $74,500 using variable costing.The fixed manufacturing overhead cost was $5 per unit.There were no beginning inventories.If 21,500 units were produced last year,then sales last year were:

A)16,000 units
B)20,400 units
C)22,600 units
D)27,000 units

Question 55

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the net operating income for the month under absorption costing?

A)$5,300
B)$3,000
C)$(12,700)
D)$8,300

Question 56

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the net operating income for the month under variable costing?

A)$21,600
B)$(15,200)
C)$8,000
D)$13,600

Question 57

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:

A)$183,600
B)$90,000
C)$70,400
D)$169,200

Question 58

Last year,Salada Corporation's variable costing net operating income was $97,000.Fixed manufacturing overhead costs released from inventory under absorption costing amounted to $14,000.What was the absorption costing net operating income last year?

A)$14,000
B)$111,000
C)$97,000
D)$83,000

Question 59

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the absorption costing unit product cost for the month?

A)$102
B)$130
C)$97
D)$125

Question 60

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations: What is the total period cost for the month under absorption costing?

A)$58,300
B)$37,100
C)$259,900
D)$201,600

Question 61

Favini Company, which has only one product, has provided the following data concerning its most recent month of operations:

-What is the net operating income for the month under variable costing?

A)$11,800
B)$3,700
C)$8,100
D)$(23,600)

Question 62

Sugiki Corporation has two divisions: the Alpha Division and the Delta Division.The Alpha Division has sales of $820,000,variable expenses of $369,000,and traceable fixed expenses of $347,300.The Delta Division has sales of $460,000,variable expenses of $294,400,and traceable fixed expenses of $134,100.The total amount of common fixed expenses not traceable to the individual divisions is $97,300.What is the company's net operating income?

A)$135,200
B)$37,900
C)$616,600
D)$519,300

Question 63

Under absorption costing,the cost of goods sold for the year would be:

A)$206,400
B)$345,600
C)$278,400
D)$360,000

Question 64

During April,Division D of Carney Company had a segment margin ratio of 15%,a variable expense ratio of 60% of sales,and traceable fixed expenses of $15,000.Division D's sales were closest to:

A)$100,000
B)$60,000
C)$33,333
D)$22,500

Question 65

Colasuonno Corporation has two divisions: the West Division and the East Division.The corporation's net operating income is $88,800.The West Division's divisional segment margin is $39,500 and the East Division's divisional segment margin is $166,900.What is the amount of the common fixed expense not traceable to the individual divisions?

A)$255,700
B)$206,400
C)$117,600
D)$128,300

Question 66

Under variable costing,the unit product cost would be:

A)$91.00
B)$72.00
C)$58.00
D)$43.00

Question 67

The ARB Company has two divisions: Electronics and DVD/Video Sales.Electronics has traceable fixed expenses of $146,280 and the DVD/Video Sales has traceable fixed expenses of $81,765.If ARB Company has a total of $322,490 in fixed expenses,what are its common fixed expenses?

A)$94,445
B)$322,490
C)$228,045
D)$47,223

Question 68

Carr Company produces a single product. During the past year, Carr manufactured 25,000 units and sold 20,000 units. Production costs for the year were as follows:

-The net operating income for the year under variable costing would be:

A)$28,000 lower than under absorption costing
B)$28,000 higher than under absorption costing
C)$50,000 lower than under absorption costing
D)$50,000 higher than under absorption costing

Question 69

Favini Company, which has only one product, has provided the following data concerning its most recent month of operations:

-What is the unit product cost for the month under variable costing?

A)$98
B)$125
C)$118
D)$91

Question 70

Carr Company produces a single product. During the past year, Carr manufactured 25,000 units and sold 20,000 units. Production costs for the year were as follows:

-The contribution margin per unit would be:

A)$12.10
B)$22.10
C)$17.70
D)$16.60

Question 71

Phillipson Corporation has two divisions: the IEB Division and the PIH Division.The corporation's net operating income is $83,900.The IEB Division's divisional segment margin is $149,700 and the PIH Division's divisional segment margin is $60,100.What is the amount of the common fixed expense not traceable to the individual divisions?

A)$233,600
B)$209,800
C)$144,000
D)$125,900

Question 72

Favini Company, which has only one product, has provided the following data concerning its most recent month of operations:

-What is the unit product cost for the month under absorption costing?

A)$91
B)$125
C)$118
D)$98

Question 73

Gore Corporation has two divisions: the Business Products Division and the Export Products Division.The Business Products Division's divisional segment margin is $55,700 and the Export Products Division's divisional segment margin is $70,600.The total amount of common fixed expenses not traceable to the individual divisions is $107,400.What is the company's net operating income?

A)$233,700
B)$(126,300)
C)$126,300
D)$18,900

Question 74

Favini Company, which has only one product, has provided the following data concerning its most recent month of operations:

-What is the net operating income for the month under absorption costing?

A)$11,800
B)$3,700
C)$8,100
D)$(23,600)

Question 75

Hansen Company produces a single product.During the last year,Hansen had net operating income under absorption costing that was $5,500 lower than its income under variable costing.The company sold 9,000 units during the year,and its variable costs were $10 per unit,of which $6 was variable selling expense.If fixed production cost is $5 per unit under absorption costing every year,then how many units did the company produce during the year?

A)7,625 units
B)8,450 units
C)10,100 units
D)7,900 units

Question 76

Stephen Company produces a single product.Last year,the company had 20,000 units in its ending inventory.During the year,Stephen's variable production costs were $12 per unit.The fixed manufacturing overhead cost was $8 per unit in the beginning inventory.The company's net operating income for the year was $9,600 higher under variable costing than it was under absorption costing.The company uses a last-in-first-out (LIFO)inventory flow assumption.Given these facts,the number of units of product in the beginning inventory last year must have been:

A)21,200
B)19,200
C)18,800
D)19,520

Question 77

The carrying value of finished goods inventory at the end of the year under variable costing would be:

A)$8,800 greater than under absorption costing.
B)$8,800 less than under absorption costing.
C)$5,800 less than under absorption costing.
D)The same as absorption costing.

Question 78

Carr Company produces a single product. During the past year, Carr manufactured 25,000 units and sold 20,000 units. Production costs for the year were as follows:

-Under absorption costing,the ending inventory for the year would be valued at:

A)$179,500
B)$213,500
C)$222,000
D)$152,000

Question 79

Stephen Company has the following data for its three stores last year: Given the above data,the total company sales were:

A)$1,250,000
B)$1,375,000
C)$1,450,000
D)$800,000

Question 80

More Company has two divisions,L and M.During July,the contribution margin in Division L was $60,000.The contribution margin ratio in Division M was 40% and its sales were $250,000.Division M's segment margin was $60,000.The common fixed expenses were $50,000 and the company net operating income was $20,000.The segment margin for Division L was:

A)$0
B)$10,000
C)$50,000
D)$60,000