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Exam 4: Variable Costing and Segment Reporting: Tools for Management

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Question 101

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Farron Corporation, 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) $(17, 000)
B) $16, 600
C) $6, 000
D) $10, 600

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

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Question 102

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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) $124, 200
B) $123, 200
C) $168, 200
D) $45, 000

E) A) and D)
F) A) and C)

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Question 103

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Because absorption costing emphasizes costs by behavior, it works well with cost-volume-profit analysis.

Pevy Corporation has two divisions: Southern Division and Northern Division.The following data are for the most recent operating period: The common fixed expenses have been allocated to the divisions on the basis of sales. What is the company's overall net operating income if it operates at the break-even points for its two divisions?

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

Under variable costing, product cost does not contain any fixed manufacturing overhead cost.

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

Swifton Corporation produces a single product.Last year, the company had net operating income of $40, 000 using variable costing.Beginning and ending inventories were 22, 000 and 27, 000 units, respectively.If the fixed manufacturing overhead cost was $3 per unit both last year and this year, what was the income using absorption costing?

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.

Pevy Corporation has two divisions: Southern Division and Northern Division.The following data are for the most recent operating period: The common fixed expenses have been allocated to the divisions on the basis of sales. The company's overall break-even sales is closest to:

Nelson 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. Required: a.Prepare a contribution format income statement for the month using variable costing. b.Prepare an income statement for the month using absorption costing.

Under variable costing, fixed manufacturing overhead is:

Clemmens Corporation has two major business segments: Consumer and Commercial.Data for the segments and for the company for August appear below: In addition, common fixed expenses totaled $265, 000 and were allocated as follows: $135, 000 to the Consumer business segment and $130, 000 to the Commercial business segment. A properly constructed segmented income statement in a contribution format would show that the net operating income of the company as a whole is:

Monce Corporation has two divisions: Home Division and Commercial Division.The following report is for the most recent operating period: The common fixed expenses have been allocated to the divisions on the basis of sales. Required: a.What is the Home Division's break-even in sales dollars? b.What is the Commercial Division's break-even in sales dollars? c.What is the company's overall break-even in sales dollars?

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?

Pratt Corporation has two major business segments-Apparel and Accessories.Data concerning those segments for October appear below: Common fixed expenses totaled $153, 000 and were allocated as follows: $73, 000 to the Apparel business segment and $80, 000 to the Accessories business segment. Required: Prepare a segmented income statement in the contribution format for the company.Omit percentages;show only dollar amounts.

When using segmented income statements, the dollar sales for a segment to break even equals the common fixed expenses of the segment divided by the segment CM ratio.

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:

O'Neill, Incorporated's segmented income statement for the most recent month is given below. For each of the following questions, refer back to the above original data. The marketing department believes that a promotional campaign at Store A costing $6, 000 will increase sales by $15, 000.If its plan is adopted, overall company net operating income should:

O'Neill, Incorporated's segmented income statement for the most recent month is given below. For each of the following questions, refer back to the above original data. If sales in Store B increase by $30, 000 as a result of a $5, 000 increase in traceable fixed expenses: