College Acct 2- Chapter 7

Azuki Corporation operates in two sales territories, Urban and Rural.

Azuki's common fixed expenses were $30,000 last year.

What was Azuki Corporation's overall net operating income for last year?

• $28,000

• $45,000

• $58,000

• $82,000

In the context of cost accounting, which of the following statements best describes the difference between absorption costing and variable costing?

• Absorption costing includes direct materials, direct labor, and both variable and fixed manufacturing overhead as product costs, while variable costing includes only direct materials, direct labor, and variable manufacturing overhead as product costs.

• Absorption costing includes only direct materials and direct labor as product costs, while variable costing includes direct materials, direct labor, and both variable and fixed manufacturing overhead as product costs.

• Absorption costing includes direct materials, direct labor, and variable manufacturing overhead as product costs, while variable costing includes direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead as product costs.

• Absorption costing includes direct materials, direct labor, variable manufacturing overhead, and variable selling and administrative expenses as product costs, while variable costing includes only direct materials, direct labor, and variable manufacturing overhead as product costs.

What is a potential risk of allocating common fixed expenses to business segments?

• It guarantees that all business segments are profitable.

• It may lead to incorrect decisions about discontinuing segments.

• It simplifies the decision-making process for managers.

• It ensures that all expenses are accurately tracked.

Uchimura Corporation has two divisions: the AFE Division and the GBI Division. The corporation's net operating income is $32,000. The AFE Division's divisional segment margin is $12,500 and the GBI Division's divisional segment margin is $175,400. What is the amount of the common fixed expense not traceable to the individual divisions?

• $57,700

• $219,900

• $155,900

• $191,100

Under which condition will net operating income be the same for both variable and absorption costing?

• When production is less than sales.

• When production and sales are equal.

• When production exceeds sales.

• When there is no beginning inventory.

Which costing method considers only variable costs for product costing (treats ALL fixed as period costs)?

• variable costing.

• absorption costing.

• process costing.

• job-order costing.

Hayworth Corporation is considering discontinuing one of its product lines. The chief financial officer (CFO) wants to understand the impact on the company's overall profitability. Which figure should the CFO examine to assess the effect of discontinuing the product line on the company's net operating income?

• the product line's segment margin minus an allocated portion of common fixed expenses

• the product line's sales revenue

• the product line's contribution margin

• the product line's segment margin

A manufacturing company that produces a single product has provided the following data:

Units in beginning inventory 0

Units produced 8,900

Units sold 8,500

Units in ending inventory 400

Variable costs per unit:

Direct materials $35

Direct labor $25

Variable manufacturing overhead $5

Variable selling and administrative expense $5

Fixed costs:

Fixed manufacturing overhead $249,200

Fixed selling and administrative expense $17,000

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

• $83 per unit

• $65 per unit

• $70 per unit

• $87 per unit

In a segmented income statement, the break-even point in dollar sales for a segment is calculated by:

• Dividing common fixed expenses by the segment's contribution margin ratio

• Dividing traceable fixed expenses by the segment's contribution margin ratio

• Dividing total fixed expenses by the segment's contribution margin ratio

• Dividing non-traceable fixed expenses by the segment's contribution margin ratio

A company produces a single product. Variable production costs are $26 per unit and variable selling and administrative expenses are $4 per unit. Fixed manufacturing overhead totals $30,000 and fixed selling and administration expenses total $36,000. Assuming a beginning inventory of zero, production of 6,000 units and sales of 5,800 units, the dollar value of the ending inventory under variable costing would be:

• $12,000

• $6,000

• $35,200

• $5,200