Exam 7: Master Budgeting

Schweinert Corporation manufactures a single product. The following data pertain to the company's operations over the last two years: What was the absorption costing net operating income last year?

DC Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $62,000 annually and one salaried estimator who is paid $36,000 annually. The corporate office has two office administrative assistants who are paid salaries of $40,000 and $32,000 annually. The president's salary is $138,000. How much of these salaries are common fixed expenses?

Under absorption costing, fixed manufacturing overhead cost is not included in product cost.

Under variable costing, fixed manufacturing overhead cost is not treated as a product cost.

Common fixed costs should not be charged to the individual segments when preparing a segmented income statement.

Kadle Corporation has two divisions: Division L and Division Q. Data from the most recent month appear below: The break-even in sales dollars for Division Q is closest to:

A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments.

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:

The term gross margin is used in reports prepared using:

If a company operates at the break even point for each of its segments, it will lose money overall if common fixed expenses exist.

Under variable costing, variable production costs are not treated as product costs.

Minick Corporation has two divisions: Grocery Division and Convenience 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 Grocery Division's break-even in sales dollars? b. What is the Convenience Division's break-even in sales dollars? c. What is the company's overall break-even in sales dollars? d. What would be the company's overall net operating income if the company operated at its two division's break-even points?

The Dean Corporation produces and sells a single product. The following data refer to the year just completed: Assume that direct labor is a variable cost. Required: a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches. b. Prepare an income statement for the year using absorption costing. c. Prepare a contribution format income statement for the year using variable costing. d. Reconcile the absorption costing and variable costing net operating income figures in (b) and (c) above.

Harris Corporation produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows: Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost. Under absorption costing, the ending inventory for the year would be valued at:

Sechrest Corporation manufactures a single product. Last year, the company's variable costing net operating income was $80,500. Fixed manufacturing overhead costs released from inventory under absorption costing amounted to $18,400. What was the absorption costing net operating income last year?

Carrejo Corporation has two divisions: Division M and Division N. Data from the most recent month appear below: Management has allocated common fixed expenses to the Divisions based on their sales. The break-even in sales dollars for Division N is closest to:

Peterson Corporation produces a single product. Data from the company's records for last year follow: Under variable costing the value of the ending finished goods inventory would be:

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:

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

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 net operating income of the company as a whole is: