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Exam 11: Variable Costing and Segment Reporting: Tools for Management

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Question 1

Multiple Choice

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What is the total period cost for the month under the absorption costing?

A) $88,400
B) $182,000
C) $61,200
D) $93,600

E) B) and C)
F) A) and B)

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A

Question 2

Multiple Choice

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Bode Corporation has two divisions: East and West. Data from the most recent month appear below: The company's common fixed expenses total $47,300. If the company operates at exactly the break-even sales of the East Division and West Division, what would be the company's overall net operating income?

A) $0
B) ($293,300)
C) $51,470
D) ($47,300)

E) None of the above
F) B) and C)

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Question 3

Multiple Choice

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For the year in question, net operating income under variable costing will be:

Net operating income is affected by the number of units produced when absorption costing is used.

Under variable costing, ending inventory on the balance sheet would be valued at:

Under variable costing, the unit product cost would be:

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:

The company's overall break-even sales is closest to:

Quinnett Corporation has two divisions: the Export Products Division and the Business Products Division. The Export Products Division's divisional segment margin is $34,300 and the Business Products Division's divisional segment margin is $86,700. The total amount of common fixed expenses not traceable to the individual divisions is $95,600. What is the company's net operating income?

What is the company's overall net operating income if it operates at the break-even points for its two divisions?

Managers will often allocate common fixed expenses to business segments because:

If a cost is a common cost of the segments on a segmented income statement, the cost should:

Redstone Corporation produces a single product and has the following cost structure: Required: a. Compute the unit product cost under absorption costing. Show your work! b. Compute the unit product cost under variable costing. Show your work!

Assuming the LIFO inventory flow assumption, if production equals sales for the period, absorption costing and variable costing will produce the same net operating income.

A proposal has been made that will lower variable expenses in Store A to 62% of sales. However, this reduction can only be accomplished by an increase in Store A's traceable fixed expenses of $8,000. If this proposal is implemented and sales remain constant, overall company net operating income should:

The unit product cost under variable costing was:

Pen Corporation manufactures a single product. Last year, the company's variable costing net operating income was $55,700 and ending inventory increased by 800 units. Fixed manufacturing overhead cost per unit was $3 in both beginning and ending inventory. Required: Determine the absorption costing net operating income for last year. Show your work!

Lee Corporation, which has only one product, has provided the following data concerning its most recent month of operations: 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. Assume direct labor is a variable cost. Required: a. What is the unit product cost for the month under variable costing? b. What is the unit product cost for the month under absorption costing? c. Prepare a contribution format income statement for the month using variable costing. d. Prepare an income statement for the month using absorption costing. e. Reconcile the variable costing and absorption costing net operating incomes for the month.

The variable costs for the South area were:

Segment margin is a better measure of the long-run profitability of a segment than contribution margin.