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

If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should not be considered a common cost.

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.

When using data from a segmented income statement, the dollar sales for the company to break even overall is equal to:

Under absorption costing, product costs include:

Which of the following costs at a manufacturing company would be treated as a product cost under both absorption costing and variable costing?

Rollison Corporation has two divisions: Retail Division and Wholesale Division.The following data are for the most recent operating period: The common fixed expenses of the company are $76, 300. The company's overall break-even sales in dollars is closest to:

During its first year of operations, Carlos Manufacturing Corporation incurred the following costs to produce 8, 000 units of its only product: The company also incurred the following costs in selling 7, 500 units of product during its first year: Assume that direct labor is a variable cost. Under variable costing, what is the total cost that would be assigned to Carlos' finished goods inventory at the end of the first year of operations?

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.

Hanks Corporation produces a single product.Operating data for the company and its absorption costing income statements for the last two years are presented below: Variable manufacturing costs are $4 per unit.Fixed manufacturing overhead was $18, 000 in each year.This fixed manufacturing overhead was applied at a rate of $2 per unit.Variable selling and administrative expenses were $1 per unit sold. Required: a.Compute the unit product cost in each year under variable costing. b.Prepare new income statements for each year using variable costing. c.Reconcile the absorption costing and variable costing net operating income for each year.

Gabbert Corporation, which has only one 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?

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:

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. 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:

Oakes Corporation, which has only one product, has provided the following data concerning its most recent month of operations: 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.

The term gross margin is used in reports prepared using:

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. The contribution margin per unit was:

Routit Corporation had the following sales and production for the past four years: Selling price per unit, variable cost per unit, and total fixed cost are the same each year.There were no beginning inventories in Year 1.Which of the following statements is correct?

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 Consumer Division's break-even sales is closest to:

Jarvix 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. What is the unit product cost for the month under absorption costing?

Peals Corporation has two divisions: Home Division and Commercial Division.The following report is for the most recent operating period: The company's common fixed expenses total $125, 280. 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?

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