Exam 7: Master Budgeting

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.

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.

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.

Criblez Corporation has two divisions: Blue Division and Gold Division. The following report is for the most recent operating period: The Gold Division's break-even sales is closest to:

Craft Corporation 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:

Cervetti Corporation has two major business segments-East and West. In July, the East business segment had sales revenues of $220,000, variable expenses of $125,000, and traceable fixed expenses of $29,000. During the same month, the West business segment had sales revenues of $890,000, variable expenses of $472,000, and traceable fixed expenses of $169,000. The common fixed expenses totaled $246,000 and were allocated as follows: $123,000 to the East business segment and $123,000 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:

Last year, Rochester Corporation's variable costing net operating income was $78,000. The fixed manufacturing overhead costs released from inventory under absorption costing amounted to $39,000. Required: Determine the absorption costing net operating income last year. Show your work!

The costs assigned to units in inventory are typically lower under variable costing than under absorption costing.

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 Store B sales increase by $20,000 with no change in fixed expenses, the overall company net operating income should:

Data for March concerning Mauger Corporation's two major business segments-Fibers and Feedstocks-appear below: Common fixed expenses totaled $461,000 and were allocated as follows: $249,000 to the Fibers business segment and $212,000 to the Feedstocks business segment. Required: Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

Chown Corporation, which has only one product, has provided the following data concerning its most recent month of operations: The total contribution margin for the month under variable costing is:

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

Johnston Corporation manufactures a single product that it sells for $30 per unit. The company has the following cost structure: Last year there was no beginning inventory. During the year, 20,000 units were produced and 17,000 units were sold. The company's net operating income for the year under variable costing is:

Insider Corporation has two divisions, J and K. During March, the contribution margin in Division J was $30,000. The contribution margin ratio in Division K was 40%, its sales were $125,000, and its segment margin was $32,000. The common fixed expenses in the company were $40,000, and the company's net operating income was $18,000. The segment margin for Division J was:

Errera Corporation has two major business segments-Retail and Wholesale. In July, the Retail business segment had sales revenues of $100,000, variable expenses of $54,000, and traceable fixed expenses of $16,000. During the same month, the Wholesale business segment had sales revenues of $920,000, variable expenses of $386,000, and traceable fixed expenses of $156,000. Common fixed expenses totaled $269,000 and were allocated as follows: $156,000 to the Retail business segment and $113,000 to the Wholesale business segment. Required: Prepare a segmented income statement in the contribution format for the company. Omit percentages; show only dollar amounts.

Gunderman Corporation has two divisions: the Alpha Division and the Charlie Division. The Alpha Division has sales of $230,000, variable expenses of $131,100, and traceable fixed expenses of $63,300. The Charlie Division has sales of $540,000, variable expenses of $307,800, and traceable fixed expenses of $120,700. The total amount of common fixed expenses not traceable to the individual divisions is $119,200. What is the company's net operating income?

Phong Corporation has two divisions: Consumer Division and Business Division. The following data are for the most recent operating period: The company's common fixed expenses total $102,340. The company's overall break-even sales is closest to:

Data for March for Lazarus Corporation and its two major business segments, North and South, appear below: In addition, common fixed expenses totaled $156,000 and were allocated as follows: $84,000 to the North business segment and $72,000 to the South business segment. The contribution margin of the South business segment is:

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

Higgins Corporation sells three products, Product A, Product B, and Product C Data concerning the company's most recent month of operations, June, appear below: