Managerial Accounting
Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Chapter – 6
Variable Costing and Segment Reporting:
Tools for Management
Chapter 06: variable costing and segment reporting: tools for management
Chapter 06 Variable Costing and Segment Reporting: Tools for Management
True / False Questions
1. Under variable costing, all variable costs are treated as product costs.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
2. Under variable costing, fixed manufacturing overhead cost is treated as a product cost.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
3. The unit product cost under absorption costing does not include fixed manufacturing
overhead cost.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
1/179
Chapter 06: variable costing and segment reporting: tools for management
4. Variable manufacturing overhead costs are treated as period costs under both absorption
and variable costing.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
5. When reconciling variable costing and absorption costing net operating income, fixed
manufacturing overhead costs deferred in inventory under absorption costing should be added
to variable costing net operating income to arrive at the absorption costing net operating
income.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
6. When production is less than sales for the period, absorption costing net operating income
will generally be less than variable costing net operating income.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
2/179
Chapter 06: variable costing and segment reporting: tools for management
7. Absorption costing is more compatible with cost-volume-profit analysis than is variable
costing.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: Other topics
Level: Medium
8. Contribution margin and segment margin mean the same thing.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
9. Assuming that a segment has both variable expenses and traceable fixed expenses, an
increase in sales should increase profits by an amount equal to the sales times the segment
margin ratio.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
10. The salary of the treasurer of a corporation is an example of a common cost which
normally cannot be traced to product segments.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
11. The salary paid to a store manager is a traceable fixed expense of the store.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
12. Segmented statements for internal use should be prepared in the contribution format.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
13. Fixed costs that are traceable to a segment may become common if the segment is divided
into smaller units.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
14. The contribution margin is viewed as a better gauge of the long run profitability of a
segment than the segment margin.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
15. In responsibility accounting, each segment in an organization should be charged with the
costs for which it is responsible and over which it has control plus its share of common
organizational costs.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
16. The contribution margin tells us what happens to profits as volume changes if a segment's
capacity and fixed costs change as well.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
17. Only those costs that would disappear over time if a segment were eliminated should be
considered traceable costs of the segment.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
18. In segment reporting, sales dollars is usually an appropriate allocation base for selling,
general, and administrative expenses.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
19. A segment is any portion or activity of an organization about which a manager seeks
revenue, cost, or profit data.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
Multiple Choice Questions
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Chapter 06: variable costing and segment reporting: tools for management
20. Routsong Company had the following sales and production data for the past four years:
Selling price per unit, variable cost per unit, and total fixed cost are the same in each year.
Which of the following statements is not correct?
A. Under variable costing, net operating income for Year 1 and Year 2 would be the same.
B. Because of the changes in production levels, under variable costing the unit product cost
will change each year.
C. The total net operating income for all four years combined would be the same under
variable and absorption costing.
D. Under absorption costing, net operating income in Year 4 would be less than the net
operating income in Year 2.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
21. Would the following costs be classified as product or period costs under variable costing
at a retail clothing store?
A. Option A
B. Option B
C. Option C
D. Option D
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
22. Fixed manufacturing overhead is included in product costs under:
A. Option A
B. Option B
C. Option C
D. Option D
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
23. Which of the following are considered to be product costs under variable costing?
I. Variable manufacturing overhead.
II. Fixed manufacturing overhead.
III. Selling and administrative expenses.
A. I.
B. I and II.
C. I and III.
D. I, II, and III.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
24. Which of the following are considered to be product costs under absorption costing?
I. Variable manufacturing overhead.
II. Fixed manufacturing overhead.
III. Selling and administrative expenses.
A. I, II, and III.
B. I and II.
C. I and III.
D. I.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
25. Under variable costing, costs that are treated as period costs include:
A. only fixed manufacturing costs.
B. both variable and fixed manufacturing costs.
C. all fixed costs.
D. only fixed selling and administrative costs.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
26. Selling and administrative expenses are considered to be:
A. a product cost under variable costing.
B. a product cost under absorption costing.
C. part of fixed manufacturing overhead under variable costing.
D. a period cost under variable costing.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
27. A portion of the total fixed manufacturing overhead cost incurred during a period may:
A. be excluded from cost of goods sold under absorption costing.
B. be charged as a period cost with the remainder deferred under variable costing.
C. never be excluded from cost of goods sold under absorption costing.
D. never be excluded from cost of goods sold under variable costing.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
28. A company using lean production methods likely would show approximately the same net
operating income under both absorption and variable costing because:
A. ending inventory would be valued in the same manner for both methods under lean
production.
B. production is geared to sales under lean production and thus there would be little or no
ending inventory.
C. under lean production fixed manufacturing overhead costs are charged to the period
incurred rather than to the product produced.
D. there is no distinction made under lean production between fixed and variable costs.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
29. Dull Corporation has been producing and selling electric razors for the past ten years.
Shown below are the actual net operating incomes for the last three years of operations at
Dull:
Dull Corporation's cost structure and selling price has not changed during its ten years of
operations. Based on the information presented above, which of the following statements are
true?
A. Dull Corporation operated above the breakeven point in each of the three years presented.
B. For the three years presented in total, Dull Corporation sold more units than it produced.
C. In Year 10, Dull Corporation produced fewer units than it sold.
D. In Year 9, Dull Corporation produced more units than it sold.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
30. Net operating income reported under absorption costing will exceed net operating income
reported under variable costing for a given period if:
A. production equals sales for that period.
B. production exceeds sales for that period.
C. sales exceed production for that period.
D. the variable manufacturing overhead exceeds the fixed manufacturing overhead.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
Source: CMA, adapted
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Chapter 06: variable costing and segment reporting: tools for management
31. If the number of units produced exceeds the number of units sold, then net operating
income under absorption costing will:
A. be equal to the net operating income under variable costing.
B. be greater than net operating income under variable costing.
C. be equal to the net operating income under variable costing plus total fixed manufacturing
costs.
D. be equal to the net operating income under variable costing less total fixed manufacturing
costs.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
32. Over an extended period of time in which the final ending inventories are zero, the
accumulated net operating income figures reported under absorption costing will be:
A. greater than those reported under variable costing.
B. less than those reported under variable costing.
C. the same as those reported under variable costing.
D. higher or lower since no generalization can be made.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
33. In an income statement segmented by product line, a fixed expense that cannot be
allocated among product lines on a cause-and-effect basis should be:
A. classified as a traceable fixed expense and not allocated.
B. allocated to the product lines on the basis of sales dollars.
C. allocated to the product lines on the basis of segment margin.
D. classified as a common fixed expense and not allocated.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
34. A common cost that should not be assigned to a particular product on a segmented income
statement is:
A. the product's advertising costs.
B. the salary of the corporation president.
C. direct materials costs.
D. the product manager's salary.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
35. All other things being equal, if a division's traceable fixed expenses increase:
A. the division's contribution margin ratio will decrease.
B. the division's segment margin ratio will remain the same.
C. the division's segment margin will decrease.
D. the overall company profit will remain the same.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
36. All other things equal, if a division's traceable fixed expenses decrease:
A. the division's segment margin will increase.
B. the overall company net operating income will decrease.
C. the division's contribution margin will increase.
D. the division's sales volume will increase.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
13/179
Chapter 06: variable costing and segment reporting: tools for management
37. Segment margin is sales minus:
A. variable expenses.
B. traceable fixed expenses.
C. variable expenses and common fixed expenses.
D. variable expenses and traceable fixed expenses.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
38. Clayton Company produces a single product. Last year, the company's variable production
costs totaled $8,000 and its fixed manufacturing overhead costs totaled $4,800. The company
produced 4,000 units during the year and sold 3,600 units. Assuming no units in the beginning
inventory:
A. under variable costing, the units in ending inventory will be costed at $3.20 each.
B. the net operating income under absorption costing for the year will be $480 lower than net
operating income under variable costing.
C. the ending inventory under variable costing will be $480 lower than the ending inventory
under absorption costing.
D. the net operating income under absorption costing for the year will be $800 lower than net
operating income under variable costing.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
14/179
Chapter 06: variable costing and segment reporting: tools for management
39. Gangwer Corporation produces a single product and has the following cost structure:
The absorption costing unit product cost is:
A. $95
B. $119
C. $61
D. $56
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
15/179
Chapter 06: variable costing and segment reporting: tools for management
40. Olds Inc., which produces a single product, has provided the following data for its most
recent month of operations:
There were no beginning or ending inventories. The absorption costing unit product cost was:
A. $97
B. $130
C. $99
D. $207
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
16/179
Chapter 06: variable costing and segment reporting: tools for management
41. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:
What is the absorption costing unit product cost for the month?
A. $102
B. $130
C. $97
D. $125
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
17/179
Chapter 06: variable costing and segment reporting: tools for management
42. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:
What is the variable costing unit product cost for the month?
A. $103
B. $99
C. $94
D. $90
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
18/179
Chapter 06: variable costing and segment reporting: tools for management
43. 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. $185,000
B. $117,600
C. $273,200
D. $302,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
19/179
Chapter 06: variable costing and segment reporting: tools for management
44. Swiatek Corporation produces a single product and has the following cost structure:
The variable costing unit product cost is:
A. $161
B. $225
C. $153
D. $158
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
20/179
Chapter 06: variable costing and segment reporting: tools for management
45. Cockriel Inc., which produces a single product, has provided the following data for its
most recent month of operations:
There were no beginning or ending inventories. The variable costing unit product cost was:
A. $42
B. $43
C. $37
D. $48
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
21/179
Chapter 06: variable costing and segment reporting: tools for management
46. 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?
A. $58,300
B. $37,100
C. $259,900
D. $201,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
22/179
Chapter 06: variable costing and segment reporting: tools for management
47. Roy Corporation produces a single product. During July, Roy produced 10,000 units.
Costs incurred during the month were as follows:
Under absorption costing, any unsold units would be carried in the inventory account at a unit
product cost of:
A. $5.10
B. $4.40
C. $3.80
D. $3.50
Absorption costing unit product cost = $44,000 ÷ 10,000 units = $4.40 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
23/179
Chapter 06: variable costing and segment reporting: tools for management
48. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:
What is the net operating income for the month under variable costing?
A. $21,600
B. $(15,200)
C. $8,000
D. $13,600
Variable costing unit product cost
Variable costing income statement
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
25/179
Chapter 06: variable costing and segment reporting: tools for management
49. A manufacturing company that produces a single 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. $5,300
B. $3,000
C. $(12,700)
D. $8,300
Unit product cost under absorption costing:
Absorption costing income statement
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
26/179
Chapter 06: variable costing and segment reporting: tools for management
50. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:
The total gross margin for the month under absorption costing is:
A. $42,000
B. $14,700
C. $69,000
D. $79,800
Unit product cost under absorption costing:
Absorption costing income statement
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Easy
27/179
Chapter 06: variable costing and segment reporting: tools for management
51. A company produces a single product. Last year, fixed manufacturing overhead was
$30,000, variable production costs were $48,000, fixed selling and administration costs were
$20,000, and variable selling administrative expenses were $9,600. There was no beginning
inventory. During the year, 3,000 units were produced and 2,400 units were sold at a price of
$40 per unit. Under variable costing, net operating income would be:
A. a profit of $6,000.
B. a profit of $4,000.
C. a loss of $2,000.
D. a loss of $4,400.
Variable costing unit product cost = $48,000 ÷ 3,000 units produced = $16 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
28/179
Chapter 06: variable costing and segment reporting: tools for management
52. A manufacturing company that produces a single product has provided the following data
concerning its most recent month of operations:
The total contribution margin for the month under variable costing is:
A. $183,600
B. $90,000
C. $70,400
D. $169,200
Unit product cost under variable costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Easy
29/179
Chapter 06: variable costing and segment reporting: tools for management
53. Last year, Heidenescher Corporation's variable costing net operating income was $63,600
and its inventory decreased by 600 units. Fixed manufacturing overhead cost was $1 per unit.
What was the absorption costing net operating income last year?
A. $64,200
B. $63,000
C. $63,600
D. $600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
30/179
Chapter 06: variable costing and segment reporting: tools for management
54. Sproles Inc. manufactures a variety of products. Variable costing net operating income
was $90,500 last year and its inventory decreased by 3,500 units. Fixed manufacturing
overhead cost was $6 per unit. What was the absorption costing net operating income last
year?
A. $90,500
B. $21,000
C. $69,500
D. $111,500
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
55. Roberts Company produces a single product. This year, the company's net operating
income under absorption costing was $2,000 lower than under variable costing. The company
sold 8,000 units during the year, and its variable costs were $8 per unit, of which $2 was
variable selling and administrative expense. If production cost was $10 per unit under
absorption costing, then how many units did the company produce during the year? (The
company produced the same number of units last year.)
A. 7,500 units
B. 7,000 units
C. 9,000 units
D. 8,500 units
Variable production cost per unit = $8 per unit - $2 per unit = $6 per unit
Absorption unit product cost = Variable production cost per unit + Fixed production cost per
unit
$10 per unit = $6 per unit + Fixed manufacturing overhead cost per unit
Fixed manufacturing overhead cost per unit = $10 per unit - $6 per unit = $4 per unit
Since absorption costing net operating income was $2,000 lower than its variable costing net
operating income, $2,000 of fixed manufacturing overhead cost was released from inventory
under absorption costing.
Fixed manufacturing overhead cost released from inventory under absorption costing = Fixed
manufacturing overhead cost per unit × Decrease in units in inventory
$2,000 = $4 per unit × Decrease in units in inventory
Decrease in units in inventory = $2,000 ÷ $4 per unit = 500 units
Units sold = Units produced + Decrease in units in inventory
8,000 units = Units produced + 500 units
Units produced = 8,000 units - 500 units = 7,500 units
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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56. Evans Company produces a single product. During the most recent year, the company had
a net operating income of $90,000 using absorption costing and $84,000 using variable
costing. The fixed overhead application rate was $6 per unit. There were no beginning
inventories. If 22,000 units were produced last year, then sales for last year were:
A. 15,000 units
B. 21,000 units
C. 23,000 units
D. 28,000 units
Since absorption costing net operating income was greater than its variable costing net
operating income by $6,000, it must have deferred $6,000 of fixed manufacturing overhead
costs in inventory under absorption costing.
Fixed manufacturing overhead costs deferred in inventory under absorption costing = Fixed
manufacturing overhead cost per unit × Increase in units in inventory
$6,000 = $6 per unit × Increase in units in inventory
Increase in units in inventory = $6,000 ÷ $6 per unit = 1,000 units
Therefore, since there were no beginning inventories and 1,000 units of the 22,000 units that
were produced were in ending inventories, sales must have been 21,000 units.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
57. Craft Company 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:
A. 16,000 units
B. 20,400 units
C. 22,600 units
D. 27,000 units
Since absorption costing net operating income was greater than its variable costing net
operating income by $5,500, it must have deferred $5,500 of fixed manufacturing overhead
costs in inventory under absorption costing.
Fixed manufacturing overhead costs deferred in inventory under absorption costing = Fixed
manufacturing overhead cost per unit × Increase in units in inventory
$5,500 = $5 per unit × Increase in units in inventory
Increase in units in inventory = $5,500 ÷ $5 per unit = 1,100 units
Therefore, since there were no beginning inventories and 1,100 units of the 21,500 units that
were produced were in ending inventories, sales must have been 20,400 units.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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58. Moore Company produces a single product. During last year, Moore's variable production
costs totaled $10,000 and its fixed manufacturing overhead costs totaled $6,800. The
company produced 5,000 units during the year and sold 4,600 units. There were no units in
the beginning inventory. Which of the following statements is true?
A. The net operating income under absorption costing for the year will be $800 higher than
net operating income under variable costing.
B. The net operating income under absorption costing for the year will be $544 higher than
net operating income under variable costing.
C. The net operating income under absorption costing for the year will be $544 lower than net
operating income under variable costing.
D. The net operating income under absorption costing for the year will be $800 lower than net
operating income under variable costing.
Therefore, net operating income under absorption costing would be $544 higher than net
operating income under variable costing.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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59. Last year, Salada Corporation's variable costing net operating income was $97,000. Fixed
manufacturing overhead costs released from inventory under absorption costing amounted to
$14,000. What was the absorption costing net operating income last year?
A. $14,000
B. $111,000
C. $97,000
D. $83,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
60. Tsuchiya Corporation manufactures a variety of products. Last year, the company's
variable costing net operating income was $57,500. Fixed manufacturing overhead costs
deferred in inventory under absorption costing amounted to $35,400. What was the absorption
costing net operating income last year?
A. $22,100
B. $35,400
C. $57,500
D. $92,900
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
61. Stephen Company produces a single product. Last year, the company had 20,000 units in
its ending inventory. During the year, Stephen's variable production costs were $12 per unit.
The fixed manufacturing overhead cost was $8 per unit in the beginning inventory. The
company's net operating income for the year was $9,600 higher under variable costing than it
was under absorption costing. The company uses a last-in-first-out (LIFO) inventory flow
assumption. Given these facts, the number of units of product in the beginning inventory last
year must have been:
A. 21,200
B. 19,200
C. 18,800
D. 19,520
Since the variable costing operating net income was $9,600 higher under variable costing than
under absorption costing, fixed manufacturing overhead costs must have been released from
inventory under absorption costing. In other words, the ending inventory must have been
lower than the beginning inventory. Under the LIFO inventory flow assumption, all of the
units in ending inventory were also in beginning inventory. Therefore, the reduction in
inventory must have been 1,200 units (= $9,600 ÷ $8 per unit).
Units in ending inventory = Units in beginning inventory - Reduction in units in inventory
20,000 units = Units in beginning inventory - 1,200 units
Units in beginning inventory = 20,000 units + 1,200 units = 21,200 units
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
62. Hansen Company produces a single product. During the last year, Hansen had net
operating income under absorption costing that was $5,500 lower than its income under
variable costing. The company sold 9,000 units during the year, and its variable costs were
$10 per unit, of which $6 was variable selling expense. If fixed production cost is $5 per unit
under absorption costing every year, then how many units did the company produce during
the year?
A. 7,625 units
B. 8,450 units
C. 10,100 units
D. 7,900 units
Since net operating income under absorption costing was $5,500 lower than under variable
costing, inventories must have decreased. A reduction in inventories results in releasing fixed
manufacturing overhead from inventories.
Fixed manufacturing overhead costs released from inventory under absorption costing =
Fixed manufacturing overhead per unit × Reduction in the units in inventory
$5,500 = $5 per unit × Reduction in the units in inventory
Reduction in the units in inventory = $5,500 ÷ $5 per unit = 1,100 units
Units in beginning inventory + Units produced = Units sold + Units in ending inventory
Units in beginning inventory - Units in ending inventory = Units sold - Units produced
Reduction in the units in inventory = Units sold - Units produced
1,100 units = 9,000 units - Units produced
Units produced = 9,000 units - 1,100 units = 7,900 units
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
63. Hatch Company has two divisions, O and E. During the year just ended, Division O had a
segment margin of $9,000 and variable expenses equal to 70% of sales. Traceable fixed
expenses for Division E were $19,000. Hatch Company as a whole had a contribution margin
ratio of 40%, a segment margin of $25,000, and sales of $200,000. Given this data, the sales
for Division E for last year were:
A. $50,000
B. $150,000
C. $87,500
D. $116,667
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E segment margin = Total segment margin - O segment margin = $25,000 - $9,000 = $16,000
E segment margin = E contribution margin - E traceable expenses
E contribution margin = E segment margin + E traceable expenses
$16,000 + $19,000 = $35,000
Total contribution margin = Total sales × Total contribution margin ratio = $200,000 × 0.40 =
$80,000
Total contribution margin = O contribution margin + E contribution margin
O contribution margin = Total contribution margin - E contribution margin
= $80,000 - $35,000 = $45,000
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O CM ratio = 1 - O variable expense ratio = 1 - 0.70 = 0.30
O contribution margin = O CM ratio × O sales
$45,000 = 0.30 × O sales
O sales = $45,000 ÷ 0.30 = $150,000
Total sales = O sales + E sales
E sales = Total sales - O sales = $200,000 - $150,000 = $50,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
64. During April, Division D of Carney Company had a segment margin ratio of 15%, a
variable expense ratio of 60% of sales, and traceable fixed expenses of $15,000. Division D's
sales were closest to:
A. $100,000
B. $60,000
C. $33,333
D. $22,500
Segment margin = 0.15 × Segment sales
Segment variable expenses = 0.60 × Segment sales
Segment traceable fixed expenses = $15,000
Segment margin = Segment sales - Segment variable expenses - Segment traceable fixed
expenses
0.15 × Segment sales = Segment sales - 0.60 × Segment sales - $15,000
0.25 × Segment sales = $15,000
Segment sales = $15,000 ÷ 0.25 = $60,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
65. Colasuonno Corporation has two divisions: the West Division and the East Division. The
corporation's net operating income is $88,800. The West Division's divisional segment margin
is $39,500 and the East Division's divisional segment margin is $166,900. What is the amount
of the common fixed expense not traceable to the individual divisions?
A. $255,700
B. $206,400
C. $117,600
D. $128,300
Total segment margin = $39,500 + $166,900 = $206,400
Total net operating income = Total segment margin - Common fixed expenses
$88,800 = $206,400 - Common fixed expenses
Common fixed expenses = $206,400 - $88,800 = $117,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
66. Gore Corporation has two divisions: the Business Products Division and the Export
Products Division. The Business Products Division's divisional segment margin is $55,700
and the Export Products Division's divisional segment margin is $70,600. The total amount of
common fixed expenses not traceable to the individual divisions is $107,400. What is the
company's net operating income?
A. $233,700
B. $(126,300)
C. $126,300
D. $18,900
Total segment margin = $55,700 + $70,600 = $126,300
Total net operating income = Total segment margin - Common fixed expenses
= $126,300 - $107,400 = $18,900
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
67. More Company has two divisions, L and M. During July, the contribution margin in
Division L was $60,000. The contribution margin ratio in Division M was 40% and its sales
were $250,000. Division M's segment margin was $60,000. The common fixed expenses were
$50,000 and the company net operating income was $20,000. The segment margin for
Division L was:
A. $0
B. $10,000
C. $50,000
D. $60,000
Net operating income = Total segment margin - Common fixed expenses
$20,000 = Total segment margin - $50,000
Total segment margin = $20,000 + $50,000 = $70,000
Total segment margin = L segment margin + M segment margin
$70,000 = L segment margin + $60,000
L segment margin = $70,000 - $60,000 = $10,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
68. Stephen Company has the following data for its three stores last year:
Given the above data, the total company sales were:
A. $1,250,000
B. $1,375,000
C. $1,450,000
D. $800,000
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Chapter 06: variable costing and segment reporting: tools for management
Segment A Variable expense ratio = Segment A Variable expenses ÷ Segment A Sales
0.60 = $240,000 ÷ Segment A Sales
Segment A Sales = $240,000 ÷ 0.60 = $400,000
Segment B CM ratio = Segment B Contribution margin ÷ Segment B Sales
0.20 = $120,000 ÷ Segment B Sales
Segment B Sales = $120,000 ÷ 0.20 = $600,000
Segment C CM ratio = 1 - Segment C Variable expense ratio
Segment C Variable expense ratio = 1 - Segment C CM ratio = 1 - 0.40 = 0.60
Segment C Variable expense ratio = Segment C Variable expenses ÷ Segment C Sales
Segment C Sales = Segment C Variable expenses ÷ Segment C Variable expense ratio
= $150,000 ÷ 0.60 = $250,000
Total sales = $400,000 + $600,000 + $250,000 = $1,250,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
69. Johnson Company operates two plants, Plant A and Plant B. Last year, Johnson Company
reported a contribution margin of $40,000 for Plant A. Plant B had sales of $200,000 and a
contribution margin ratio of 40%. Net operating income for the company was $27,000 and
traceable fixed expenses for the two stores totaled $50,000. Johnson Company's common
fixed expenses were:
A. $43,000
B. $50,000
C. $93,000
D. $120,000
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Chapter 06: variable costing and segment reporting: tools for management
Plant B Contribution margin = Plant B CM ratio × Plant B Sales = 0.40 × $200,000 = $80,000
Net operating income = Segment margin - Common fixed expenses
$27,000 = $70,000 - Common fixed expenses
Common fixed expenses = $70,000 - $27,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
70. The ARB Company has two divisions: Electronics and DVD/Video Sales. Electronics has
traceable fixed expenses of $146,280 and the DBD/Video Sales has traceable fixed expenses
of $81,765. If ARB Company has a total of $322,490 in fixed expenses, what are its common
fixed expenses?
A. $94,445
B. $322,490
C. $228,045
D. $47,223
Common fixed expenses = Total fixed expenses - Traceable fixed expenses
= $322,490 - ($146,280 + $81,765) =$94,445
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
71. Leis Retail Company has two Stores, M and N. Store N had sales of $180,000 during
March, a segment margin of $54,000, and traceable fixed expenses of $26,000. The company
as a whole had a contribution margin ratio of 25% and $120,000 in total contribution margin.
Based on this information, total variable expenses in Store M for the month must have been:
A. $140,000
B. $260,000
C. $300,000
D. $360,000
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Chapter 06: variable costing and segment reporting: tools for management
CM ratio = Contribution margin ÷ Sales
0.25 = $120,000 ÷ Sales
Sales = $120,000 ÷ 0.25 = $480,000
Contribution margin = Sales - Variable expenses
$120,000 = $480,000 - Variable expenses
Variable expenses = $480,000 - $120,000 = $360,000
Store N Segment margin = Store N Contribution margin - Segment N Traceable fixed
expenses
$54,000 = Store N Contribution margin - $26,000
Store N Contribution margin = $54,000 + $26,000 = $80,000
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Store N Contribution margin = Store N Sales - Store N Variable expenses
$80,000 = $180,000 - Store N Variable expenses
Store N Variable expenses = $180,000 - $80,000 = $100,000
Total Variable expenses = Store M Variable expenses + Store N Variable expenses
$360,000 = Store M Variable expenses + $100,000
Store M Variable expenses = $360,000 - $100,000 = $260,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
72. Sugiki Corporation has two divisions: the Alpha Division and the Delta Division. The
Alpha Division has sales of $820,000, variable expenses of $369,000, and traceable fixed
expenses of $347,300. The Delta Division has sales of $460,000, variable expenses of
$294,400, and traceable fixed expenses of $134,100. The total amount of common fixed
expenses not traceable to the individual divisions is $97,300. What is the company's net
operating income?
A. $135,200
B. $37,900
C. $616,600
D. $519,300
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
73. Phillipson Corporation has two divisions: the IEB Division and the PIH Division. The
corporation's net operating income is $83,900. The IEB Division's divisional segment margin
is $149,700 and the PIH Division's divisional segment margin is $60,100. What is the amount
of the common fixed expense not traceable to the individual divisions?
A. $233,600
B. $209,800
C. $144,000
D. $125,900
Net operating income = Segment margin - Common fixed expenses
$83,900 = ($149,700 +$60,100) - Common fixed expenses
$83,900 = $209,800 - Common fixed expenses
Common fixed expenses = $209,800 - $83,900 = $125,900
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
The Pacific Company manufactures a single product. The following data relate to the year
just completed:
During the last year, 5,000 units were produced and 4,800 units were sold. There were no
beginning inventories.
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Chapter 06: variable costing and segment reporting: tools for management
74. Under variable costing, the unit product cost would be:
A. $91.00
B. $72.00
C. $58.00
D. $43.00
Under variable costing, the unit product cost is the variable production cost of $43 per unit.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
75. The carrying value of finished goods inventory at the end of the year under variable
costing would be:
A. $8,800 greater than under absorption costing.
B. $8,800 less than under absorption costing.
C. $5,800 less than under absorption costing.
D. The same as absorption costing.
Fixed manufacturing overhead per unit = Fixed manufacturing overhead ÷ Units produced
= $145,000 ÷ 5,000 units = $29 per unit
Change in units in inventory = Units produced - Units sold = 5,000 units - 4,800 units = 200
units
Since inventories increased by 200 units, fixed manufacturing overhead is deferred in
inventories and absorption costing net operating income will be greater than variable costing
net operating income.
Manufacturing overhead deferred in inventory = Fixed manufacturing overhead per unit ×
Increase in units in inventory = $29 per unit × 200 unit increase = $5,800
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
76. Under absorption costing, the cost of goods sold for the year would be:
A. $206,400
B. $345,600
C. $278,400
D. $360,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
Carr Company produces a single product. During the past year, Carr manufactured 25,000
units and sold 20,000 units. Production costs for the year were as follows:
Sales totaled $850,000, variable selling expenses totaled $110,000, and fixed selling and
administrative expenses totaled $170,000. There were no units in beginning inventory.
Assume that direct labor is a variable cost.
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77. The contribution margin per unit would be:
A. $12.10
B. $22.10
C. $17.70
D. $16.60
Variable expenses per unit:
Selling price per unit = $850,000 ÷ 20,000 units = $42.50 per unit
Unit CM = Selling price per unit – Variable expenses per unit
= $42.50 per unit – $25.90 per unit = $16.60 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
78. Under absorption costing, the ending inventory for the year would be valued at:
A. $179,500
B. $213,500
C. $222,000
D. $152,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
79. The net operating income for the year under variable costing would be:
A. $28,000 lower than under absorption costing
B. $28,000 higher than under absorption costing
C. $50,000 lower than under absorption costing
D. $50,000 higher than under absorption costing
Change in units in inventory = Units produced - Units sold
= 25,000 units - 20,000 units = 5,000 unit increase
Fixed manufacturing overhead per unit = Fixed manufacturing overhead ÷ Units produced
= $250,000 ÷ 25,000 units = $10.00 per unit
Since the units produced exceeds the units sold, fixed manufacturing overhead costs will be
deferred in inventory and absorption costing net operating income will exceed variable
costing net operating income.
Manufacturing overhead deferred in inventory = Fixed manufacturing overhead per unit ×
Increase in units in inventory = $10.00 per unit × 5,000 units = $50,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
Favini Company, which has only one product, has provided the following data concerning its
most recent month of operations:
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80. What is the unit product cost for the month under variable costing?
A. $98
B. $125
C. $118
D. $91
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
81. What is the unit product cost for the month under absorption costing?
A. $91
B. $125
C. $118
D. $98
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
82. What is the net operating income for the month under variable costing?
A. $11,800
B. $3,700
C. $8,100
D. $(23,600)
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
83. What is the net operating income for the month under absorption costing?
A. $11,800
B. $3,700
C. $8,100
D. $(23,600)
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Hadlock Company, which has only one product, has provided the following data concerning
its most recent month of operations:
84. What is the unit product cost for the month under variable costing?
A. $61
B. $71
C. $69
D. $79
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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85. The total contribution margin for the month under the variable costing approach is:
A. $192,000
B. $128,000
C. $72,800
D. $140,800
Unit CM = Selling price per unit – Variable expenses per unit
= $91 per unit – $69 per unit = $22 per unit
Contribution margin = Unit CM × Unit sales = $22 per unit × 6,400 units = $140,800
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
86. What is the total period cost for the month under the variable costing approach?
A. $125,600
B. $108,800
C. $176,800
D. $68,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
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87. What is the net operating income for the month under variable costing?
A. $15,200
B. $4,000
C. $(9,200)
D. $19,200
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Abe Company, which has only one product, has provided the following data concerning its
most recent month of operations:
88. What is the unit product cost for the month under variable costing?
A. $99
B. $81
C. $106
D. $88
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
89. What is the unit product cost for the month under absorption costing?
A. $88
B. $99
C. $81
D. $106
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
90. The total contribution margin for the month under the variable costing approach is:
A. $162,600
B. $378,000
C. $226,800
D. $319,200
Unit CM = Selling price per unit - Variable expenses per unit
= $126 per unit - ($81 per unit + $7 per unit) = $126 per unit - $88 per unit = $38 per unit
Contribution margin = Unit CM × Unit sales = $38 per unit × 8,400 units = $319,200
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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91. The total gross margin for the month under the absorption costing approach is:
A. $319,200
B. $16,800
C. $226,800
D. $256,500
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
92. What is the total period cost for the month under the variable costing approach?
A. $156,600
B. $210,000
C. $366,600
D. $307,800
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
93. What is the total period cost for the month under the absorption costing approach?
A. $156,600
B. $210,000
C. $151,200
D. $366,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
94. What is the net operating income for the month under variable costing?
A. $11,400
B. $16,800
C. $5,400
D. $(12,900)
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
95. What is the net operating income for the month under absorption costing?
A. $11,400
B. $(12,900)
C. $16,800
D. $5,400
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Ingerson Company, which has only one product, has provided the following data concerning
its most recent month of operations:
96. What is the unit product cost for the month under variable costing?
A. $109
B. $79
C. $99
D. $89
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
97. What is the net operating income for the month under variable costing?
A. $12,000
B. $8,000
C. $(27,600)
D. $4,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Jarvinen Company, 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.
98. What is the unit product cost for the month under variable costing?
A. $62
B. $58
C. $91
D. $87
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
99. What is the unit product cost for the month under absorption costing?
A. $91
B. $87
C. $62
D. $58
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
100. What is the net operating income for the month under variable costing?
A. $11,600
B. $2,900
C. $8,700
D. $0
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
101. What is the net operating income for the month under absorption costing?
A. $2,900
B. $0
C. $8,700
D. $11,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
DeAnne Company produces a single product. The company's variable costing income
statement for August appears below:
The company produced 35,000 units in August and the beginning inventory consisted of
8,000 units. Variable production costs per unit and total fixed costs have remained constant
over the past several months.
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Chapter 06: variable costing and segment reporting: tools for management
102. The value of the company's inventory on August 31 under the absorption costing method
is:
A. $27,000
B. $42,000
C. $36,000
D. $47,000
Units sold = $600,000 ÷ $15 per unit = 40,000 units
Units in beginning inventory + Units produced = Units sold + Units in ending inventory
8,000 units + 35,000 units = 40,000 units + Units in ending inventory
Units in ending inventory = 8,000 units + 35,000 units - 40,000 units = 3,000 units
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
103. Under absorption costing, for the month ended August 31, the company would report a:
A. $20,000 profit
B. $5,000 loss
C. $35,000 profit
D. $5,000 profit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
Fahey Company manufactures a single product that it sells for $25 per unit. The company has
the following cost structure:
There were no units in beginning inventory. During the year, 18,000 units were produced and
15,000 units were sold.
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Chapter 06: variable costing and segment reporting: tools for management
104. Under absorption costing, the unit product cost is:
A. $9
B. $12
C. $13
D. $16
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
105. The company's net operating income for the year under variable costing is:
A. $60,000
B. $81,000
C. $57,000
D. $69,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Galino Company, which has only one product, has provided the following data concerning its
most recent month of operations:
106. The total contribution margin for the month under the variable costing approach is:
A. $124,800
B. $49,400
C. $20,400
D. $143,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
107. The total gross margin for the month under the absorption costing approach is:
A. $49,400
B. $18,200
C. $73,400
D. $124,800
Unit product cost under absorption costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
108. What is the total period cost for the month under the variable costing approach?
A. $31,200
B. $104,400
C. $117,400
D. $135,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
109. What is the total period cost for the month under the absorption costing approach?
A. $104,400
B. $31,200
C. $13,000
D. $135,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
Kilihea Corporation produces a single product. The company's absorption costing income
statement for July follows:
The company's variable production costs are $20 per unit and its fixed manufacturing
overhead totals $80,000 per month.
110. Net operating income under the variable costing method for July would be:
A. $53,000
B. $49,800
C. $61,000
D. $57,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
111. The contribution margin per unit during July was:
A. $17
B. $20
C. $25
D. $6
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
112. The break-even point in units for the month under variable costing is:
A. 6,850 units
B. 4,000 units
C. 3,200 units
D. 5,100 units
Fixed expenses = Fixed selling and administrative expense + Fixed manufacturing overhead
= $57,000 + $80,000 = $137,000
Unit sales to break even = Fixed expenses ÷ Unit CM
= $137,000 ÷ $20
= 6,850 units
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Eagle Corporation manufactures a picnic table. Shown below is Eagle's cost structure:
In its first year of operations, Eagle produced and sold 10,000 tables. The tables sold for $120
each.
113. If Eagle had sold only 9,000 tables in its first year, what total amount of cost would have
been assigned to the 1,000 tables in finished goods inventory under the absorption costing
method?
A. $37,100
B. $45,800
C. $58,000
D. $74,200
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
114. How would Eagle's variable costing net operating income have been affected in its first
year if only 9,000 tables were sold instead of 10,000?
A. net operating income would have been $37,100 lower
B. net operating income would have been $45,800 lower
C. net operating income would have been $56,000 lower
D. net operating income would have been $62,000 lower
Unit CM = Selling price per unit - Variable expenses per unit
= $120 per unit - ($58 per unit + $6 per unit) = $120 per unit - $64 per unit = $56 per unit
Change in contribution margin = Unit CM ratio × Change in unit sales
= $56 per unit × 1,000 units = $56,000
Since fixed expenses would not be affected by this change in unit sales, the change in
contribution margin would drop directly to the bottom line, decreasing net operating income
by $56,000.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
115. How would Eagle's absorption costing net operating income have been affected in its
first year if 12,000 tables were produced instead of 10,000 and Eagle still sold 10,000 tables?
A. net operating income would not have been affected
B. net operating income would have been $27,000 higher
C. net operating income would have been $31,500 higher
D. net operating income would have been $116,000 lower
Absorption costing income statement with production and sales of 10,000 units:
Absorption costing income statement with production of 12,000 units and sales of 10,000
units:
Therefore, net operating income would have been $27,000 higher (= $398,000 – $371,000)
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
Green Enterprises produces a single product. The following data were provided by the
company for the most recent period:
116. Under variable costing, the unit product cost is:
A. $20
B. $18
C. $15
D. $22
Under variable costing, the unit product cost is the variable manufacturing cost.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
117. Under absorption costing, the unit product cost is:
A. $20
B. $18
C. $15
D. $25
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
118. For the period above, one would expect the net operating income under absorption
costing to be:
A. higher than the net operating income under variable costing.
B. lower than the net operating income under variable costing.
C. the same as the net operating income under variable costing.
D. The relation between absorption costing net operating income and variable costing net
operating income cannot be determined.
When production exceeds sales, net operating income under absorption costing will always be
higher than under variable costing. A portion of fixed manufacturing cost will be deferred in
ending inventory rather than being included in the income statement.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
Whitney, Inc., produces a single product. The following data pertain to one month's
operations:
119. The carrying value on the balance sheet of the ending finished goods inventory under
variable costing would be:
A. $16,000
B. $10,000
C. $19,000
D. $12,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
120. The carrying value on the balance sheet of the ending finished goods inventory under
absorption costing would be:
A. $16,000
B. $10,000
C. $12,000
D. $21,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
121. For the month referred to above, net operating income under variable costing will be:
A. higher than net operating income under absorption costing.
B. lower than net operating income under absorption costing.
C. the same as net operating income under absorption costing.
D. The relation between variable costing and absorption costing net operating income cannot
be determined.
Since production exceeds sales, the net operating income for variable costing will be lower
than for absorption costing. This occurs because under absorption costing, some of the fixed
manufacturing overhead cost is deferred in ending inventories.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
Mennig Corporation produces a single product and has the following cost structure:
122. The unit product cost under absorption costing is:
A. $92
B. $228
C. $182
D. $85
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
123. The unit product cost under variable costing is:
A. $182
B. $92
C. $87
D. $94
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
Byron Company, which has only one product, has provided the following data concerning its
most recent month of operations:
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Chapter 06: variable costing and segment reporting: tools for management
124. What is the unit product cost for the month under variable costing?
A. $86
B. $77
C. $83
D. $92
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
125. What is the unit product cost for the month under absorption costing?
A. $83
B. $92
C. $86
D. $77
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
During the last year, Snyder Co. produced 10,000 units of its only product. Costs incurred by
Snyder during the year were as follows:
126. The unit product cost under absorption costing was:
A. $5.43
B. $3.81
C. $4.71
D. $4.12
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
127. The unit product cost under variable costing was:
A. $3.20
B. $3.81
C. $4.12
D. $3.51
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Medium
Deboer Company, which has only one product, has provided the following data concerning
its most recent month of operations:
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Chapter 06: variable costing and segment reporting: tools for management
128. What is the total period cost for the month under the variable costing approach?
A. $8,400
B. $17,600
C. $26,000
D. $22,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Hard
129. What is the total period cost for the month under the absorption costing approach?
A. $8,400
B. $17,600
C. $26,000
D. $13,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Hard
The following cost formula relates to last year's operations at Lemine Manufacturing
Corporation:
Y = $84,000 + $60.00X
In the formula above, 75% of the fixed cost and 90% of the variable cost are manufacturing
costs. Y is the total cost and X is the number of units produced and sold.
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Chapter 06: variable costing and segment reporting: tools for management
130. If Lemine produces and sells 7,000 units, what is the unit product cost under each of the
following methods?
A. Option A
B. Option B
C. Option C
D. Option D
Variable manufacturing cost = 0.90 × $60.00 = $54.00
Fixed manufacturing cost = 0.75 × $84,000 = $63,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
131. If Lemine produces and sells only 6,000 units, what is the unit product cost under each of
the following methods?
A. Option A
B. Option B
C. Option C
D. Option D
Variable manufacturing cost = 0.90 × $60.00 = $54.00
Fixed manufacturing cost = 0.75 × $84,000 = $63,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
Pellman Inc., which produces a single product, has provided the following data for its most
recent month of operations:
There were no beginning or ending inventories.
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Chapter 06: variable costing and segment reporting: tools for management
132. The unit product cost under absorption costing was:
A. $91
B. $72
C. $25
D. $32
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
133. The unit product cost under variable costing was:
A. $33
B. $32
C. $72
D. $40
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
Elbon Company, which has only one product, has provided the following data concerning its
most recent month of operations:
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Chapter 06: variable costing and segment reporting: tools for management
134. What is the net operating income for the month under variable costing?
A. $10,200
B. $(19,000)
C. $8,800
D. $1,400
Unit product cost under variable costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
104/179
Chapter 06: variable costing and segment reporting: tools for management
135. What is the net operating income for the month under absorption costing?
A. $1,400
B. $(19,000)
C. $8,800
D. $10,200
Unit product cost under absorption costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
Gordon Company produces a single product that sells for $10 per unit. Last year there were
no beginning inventories, 100,000 units were produced, and 80,000 units were sold. The
company has the following cost structure:
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136. Net operating income under variable costing would be:
A. $114,000
B. $210,000
C. $234,000
D. $330,000
Unit product cost under variable costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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137. The carrying value on the balance sheet of the ending finished goods inventory under
absorption costing would be:
A. $80,000
B. $104,000
C. $110,000
D. $124,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
Clements Company, which has only one product, has provided the following data concerning
its most recent month of operations:
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138. The total contribution margin for the month under the variable costing approach is:
A. $61,500
B. $51,000
C. $55,500
D. $43,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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139. The total gross margin for the month under the absorption costing approach is:
A. $19,500
B. $51,000
C. $74,000
D. $55,500
Unit product cost under absorption costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
Kierst Company, 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.
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140. What is the net operating income for the month under variable costing?
A. $10,600
B. $16,200
C. $6,200
D. $7,500
Unit product cost under variable costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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141. What is the net operating income for the month under absorption costing?
A. $7,500
B. $16,200
C. $6,200
D. $10,600
Unit product cost under absorption costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
Krug Corporation manufactures a variety of products. The following data pertain to the
company's operations over the last two years:
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142. What was the absorption costing net operating income last year?
A. $86,200
B. $89,100
C. $88,800
D. $91,400
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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143. What was the absorption costing net operating income this year?
A. $91,300
B. $93,300
C. $95,900
D. $88,500
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
Enz Corporation manufactures a variety of products. The following data pertain to the
company's operations over the last two years:
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144. What was the absorption costing net operating income last year?
A. $56,000
B. $37,000
C. $57,000
D. $75,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
145. What was the absorption costing net operating income this year?
A. $92,000
B. $56,000
C. $73,000
D. $75,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
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Vanstee Corporation manufactures a variety of products. Variable costing net operating
income last year was $60,000 and this year was $67,000. Last year, $37,000 in fixed
manufacturing overhead costs were deferred in inventory under absorption costing. This year,
$8,000 in fixed manufacturing overhead costs were released from inventory under absorption
costing.
146. What was the absorption costing net operating income last year?
A. $60,000
B. $23,000
C. $97,000
D. $89,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
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147. What was the absorption costing net operating income this year?
A. $38,000
B. $96,000
C. $75,000
D. $59,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
Condit Corporation manufactures a variety of products. Variable costing net operating
income was $75,600 last year and was $80,100 this year. Last year, inventory decreased by
3,400 units. This year, inventory increased by 3,000 units. Fixed manufacturing overhead cost
is $5 per unit.
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148. What was the absorption costing net operating income last year?
A. $77,600
B. $75,600
C. $92,600
D. $58,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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149. What was the absorption costing net operating income this year?
A. $78,100
B. $95,100
C. $65,100
D. $73,600
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
The Rial Company's income statement for June is given below:
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150. If sales for Division F increase $40,000 with a $10,000 increase in the Division's
traceable fixed costs, the overall company net operating income should:
A. increase by $30,000
B. increase by $6,000
C. increase by $2,889
D. decrease by $4,000
CM ratio = Contribution margin ÷ Sales = $88,000 ÷ $220,000 = 0.40
Change in contribution margin = CM ratio × Change in sales = 0.40 × $40,000 =
Change in net operating income = Change in contribution margin - Increase in traceable fixed
costs
= $16,000 - $10,000 = $6,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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151. During June, the sales clerks in Division F received salaries totaling $35,000. Assume
that during July the salaries of these sales clerks are discontinued and instead they are paid a
commission of 18% of sales. If sales in Division F increase by $65,000 as a result of this
change, the July segment margin for Division F should be:
A. $42,700
B. $19,400
C. $54,400
D. $94,000
Projected sales = $220,000 + $65,000 = $285,000
Current variable expense ratio = $132,000 ÷ $220,000 = 0.60
Projected variable expense ratio = 0.60 + 0.18 = 0.78
Projected variable expenses = 0.78 × $285,000 = $222,300
Projected traceable fixed expenses = $55,000 - $35,000 = $20,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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152. If the sales in Division L increase by 30% while common fixed expenses in the company
decrease by $10,000, the segment margin for Division L should:
A. increase by $32,400
B. increase by $10,800
C. decrease by $22,400
D. decrease by $65,600
CM ratio = Contribution margin ÷ Sales = $108,000 ÷ $180,000 = 0.60
Change in contribution margin = CM ratio × Change in sales = 0.60 × (0.30 × $180,000) =
$32,400
The decrease in common fixed expenses has no impact on the Division L segment margin.
Therefore, the Division L segment margin will increase by $32,400.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
153. A proposal has been made that will lower variable expenses in Division L to 35% of
sales. However, this reduction can only be accomplished by a $15,000 increase in Division
L's traceable fixed expenses. If this proposal is implemented and if sales remain constant,
overall company net operating income should:
A. increase by $15,000
B. increase by $24,000
C. decrease by $15,000
D. decrease by $6,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
Pong Incorporated's income statement for the most recent month is given below.
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154. If Store G sales increase by $40,000 with no change in fixed costs, the overall company
net operating income should:
A. increase by $4,000
B. increase by $8,000
C. increase by $24,000
D. increase by $20,000
CM ratio = Contribution margin ÷ Sales = $30,000 ÷ $60,000 = 0.50
Change in contribution margin = CM ratio × Change in sales = 0.50 × $40,000 = $20,000
Since there is no change in fixed costs, the net operating income should increase by $20,000.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
155. The marketing department believes that a promotional campaign for Store H costing
$8,000 will increase the store's sales by $15,000. If the campaign is adopted, overall company
net operating income should:
A. decrease by $5,000
B. decrease by $5,500
C. increase by $2,000
D. increase by $7,000
CM ratio = Contribution margin ÷ Sales = $60,000 ÷ $90,000 = 2/3
Change in contribution margin = CM ratio × Change in sales = 2/3 × $15,000 = $10,000
Change in net operating income = Change in contribution margin - Cost of promotional
campaign
= $10,000 - $8,000 = $2,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Ring, Incorporated's income statement for the most recent month is given below.
For each of the following questions, refer back to the original data.
156. If Store Q sales increase by $30,000 with no change in fixed expenses, the overall
company net operating income should:
A. increase by $3,750
B. increase by $7,500
C. increase by $12,000
D. increase by $18,000
CM ratio = Contribution margin ÷ Sales = $160,000 ÷ $400,000 = 0.40
Change in contribution margin = CM ratio × Change in sales = 0.40 × $30,000 = $12,000
Since there is no change in any other cost, the net operating income should increase by
$12,000.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
157. The marketing department believes that a promotional campaign at Store P costing
$5,000 will increase sales by $15,000. If the campaign is adopted, overall company net
operating income should:
A. decrease by $800
B. decrease by $5,800
C. increase by $5,800
D. increase by $10,000
CM ratio = Contribution margin ÷ Sales = $56,000 ÷ $200,000 = 0.28
Change in contribution margin = CM ratio × Change in sales = 0.28 × $15,000 = $4,200
Change in net operating income = Change in contribution margin - Cost of promotional
campaign
= $4,200 - $5,000 = -$800
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
158. A proposal has been made that will lower variable costs in Store P to 65% of sales.
However, this reduction can only be accomplished by a $16,000 increase in Store P's
traceable fixed costs. If this proposal is implemented and sales remain constant, overall
company net operating income should:
A. remain the same
B. decrease by $2,000
C. increase by $2,000
D. increase by $14,000
Proposed variable expense ratio = 0.65
Proposed variable expenses = 0.65 × $200,000 = $130,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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159. If sales in Store Q increase by $30,000 as a result of a $7,000 increase in traceable fixed
costs:
A. Store Q's contribution margin should increase by $18,000
B. Store Q's segment margin should increase by $12,000
C. Store Q's contribution margin should increase by $11,000
D. Store Q's segment margin should increase by $5,000
CM ratio = Contribution margin ÷ Sales = $160,000 ÷ $400,000 = 0.40
Change in contribution margin = CM ratio × Change in sales = 0.40 × $30,000 = $12,000
Change in net operating income = Change in contribution margin - Increase in traceable fixed
costs
= $12,000 - $7,000 = $5,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
160. Currently the sales clerks receive a salary of $17,000 per month in Store Q. A proposal
has been made to change from a fixed salary to a sales commission of 5%. Assume that this
proposal is adopted, and that as a result sales in Store Q increase by $40,000. The new
segment margin for Store Q should be:
A. $47,000
B. $61,000
C. $85,000
D. $44,000
Current variable expense ratio = Variable expenses ÷ Sales = $240,000 ÷ $400,000 = 0.60
Projected variable expense ratio = 0.60 + 0.05 = 0.65
Projected sales = $400,000 + $40,000 = $440,000
Projected variable expenses = 0.65 × $440,000 = $286,000
Projected traceable fixed expenses = $110,000 - $17,000 = $93,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
The Gasson Company sells three products, Product A, Product B and Product C, and had
sales of $1,000,000 during the month of June. The company's overall contribution margin
ratio was 37% and fixed expenses totaled $350,000. Sales were: Product A, $500,000;
Product B, $300,000; and Product C, $200,000. Traceable fixed costs were: Product A,
$120,000; Product B, $100,000; and Product C, $60,000. The variable expenses of Product A
were $300,000 and the variable expenses of Product B were $180,000.
161. The net operating income for the company as a whole for June was:
A. $20,000
B. $90,000
C. $170,000
D. $300,000
Total contribution margin = Overall CM ratio × Total sales = 0.37 × $1,000,000 = $370,000
Net operating income = Total contribution margin - Total fixed expenses = $370,000 $350,000 = $20,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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162. The contribution margin ratio for Product C is:
A. 75%
B. 69%
C. 31%
D. 25%
Total contribution margin = Overall CM ratio × Total sales = 0.37 × $1,000,000 = $370,000
Total contribution margin = Total sales - Total variable expenses
$370,000 = $1,000,000 - Total variable expenses
Total variable expenses = $1,000,000 - $370,000 = $630,000
Total variable expenses = Product A variable expenses + Product B variable expenses +
Product C variable expenses
$630,000 = $300,000 + $180,000 + Product C variable expenses
Product C variable expenses = $630,000 - $300,000 - $180,000 = $150,000
Product C contribution margin = $200,000 - $150,000 = $50,000
Product C CM ratio = Product C contribution margin ÷ Product C sales = $50,000 ÷ $200,000
= 0.25
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
163. The common fixed expense for Gasson Company for the month of June was:
A. $350,000
B. $280,000
C. $70,000
D. $20,000
Total traceable fixed expenses = $120,000 + $100,000 + $60,000 = $280,000
Common fixed expenses = Total fixed expenses - Total traceable fixed expenses
= $350,000 - $280,000 = $70,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
164. The product line segment margin for Product A for June was:
A. $200,000
B. $80,000
C. $65,000
D. $10,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
165. The contribution margin in dollars for Product B for June was:
A. $20,000
B. $111,000
C. $120,000
D. $200,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
Tennison Corporation has two major business segments-Consumer and Commercial. Data for
the segment and for the company for May appear below:
In addition, common fixed expenses totaled $371,000 and were allocated as follows:
$186,000 to the Consumer business segment and $185,000 to the Commercial business
segment.
166. The contribution margin of the Commercial business segment is:
A. $769,000
B. $272,000
C. $313,000
D. $86,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
167. A properly constructed segmented income statement in a contribution format would
show that the segment margin of the Consumer business segment is:
A. $272,000
B. $270,000
C. $86,000
D. $514,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
168. A properly constructed segmented income statement in a contribution format would
show that the net operating income of the company as a whole is:
A. $769,000
B. $104,000
C. $475,000
D. -$267,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
Stryker Corporation has two major business segments-East and West. In April, the East
business segment had sales revenues of $500,000, variable expenses of $280,000, and
traceable fixed expenses of $80,000. During the same month, the West business segment had
sales revenues of $970,000, variable expenses of $514,000, and traceable fixed expenses of
$184,000. The common fixed expenses totaled $280,000 and were allocated as follows:
$112,000 to the East business segment and $168,000 to the West business segment.
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169. The contribution margin of the West business segment is:
A. $456,000
B. $140,000
C. $28,000
D. $676,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
170. A properly constructed segmented income statement in a contribution format would
show that the segment margin of the East business segment is:
A. $108,000
B. $28,000
C. $140,000
D. $280,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
171. A properly constructed segmented income statement in a contribution format would
show that the net operating income of the company as a whole is:
A. $412,000
B. $676,000
C. -$148,000
D. $132,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
Canon Company has two sales areas: North and South. During last year, the contribution
margin in the North Area was $50,000, or 20% of sales. The segment margin in the South was
$15,000, or 8% of sales. Traceable fixed expenses are $15,000 in the North and $10,000 in the
South. During last year, the company reported total net operating income of $26,000.
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172. The total fixed expenses (traceable and common) for Canon Company for the year were:
A. $49,000
B. $25,000
C. $24,000
D. $50,000
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Chapter 06: variable costing and segment reporting: tools for management
Total traceable fixed expenses = North Traceable fixed expenses + South Traceable fixed
expenses
= $15,000 + $10,000 = $25,000
North Segment margin = North Contribution margin - North Traceable fixed expenses
= $50,000 - $15,000 = $35,000
Total Segment margin = North Segment margin + South Segment margin
= $35,000 + $15,000 = $50,000
Net operating income = Segment margin - Common fixed expenses
Common fixed expenses = Segment margin - Net operating income = $50,000 - $26,000 =
$24,000
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Chapter 06: variable costing and segment reporting: tools for management
The total fixed expenses = Traceable fixed expenses + Common fixed expenses
= $25,000 + $24,000 = $49,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
173. The variable expenses for the South Area for the year were:
A. $230,000
B. $185,000
C. $162,500
D. $65,000
South Segment margin = 0.08 × South Sales
$15,000 = 0.08 × South Sales
South Sales = $15,000 ÷ 0.08 = $187,500
South segment margin = South contribution margin - South traceable fixed expenses
$15,000 = South contribution margin - $10,000
South contribution margin = $15,000 + $10,000 = $25,000
South Contribution margin = South Sales - South Variable expenses
$25,000 = $187,500 - South Variable expenses
South Variable expenses = $187,500 - $25,000 = $162,500
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
Data for June for Ozaki Corporation and its two major business segments, North and South,
appear below:
In addition, common fixed expenses totaled $145,000 and were allocated as follows: $73,000
to the North business segment and $72,000 to the South business segment.
174. The contribution margin of the South business segment is:
A. $343,000
B. $63,000
C. $119,000
D. $192,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
175. A properly constructed segmented income statement in a contribution format would
show that the segment margin of the North business segment is:
A. $270,000
B. $119,000
C. $207,000
D. $192,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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176. A properly constructed segmented income statement in a contribution format would
show that the net operating income of the company as a whole is:
A. $(56,000)
B. $89,000
C. $343,000
D. $234,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
Falquez Company sells three products: R, S, and T. Data for activity of Falquez Company
during July are as follows:
Common fixed expenses for July amounted to $90,000.
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177. Net operating income for the company was:
A. $166,000
B. $256,000
C. $334,000
D. $46,000
Contribution margin = CM ratio × Sales = 0.32 × $800,000 = $256,000
Net operating income = Contribution margin - Traceable fixed expenses - Common fixed
expenses
= $256,000 - $120,000 - $90,000 = $46,000
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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178. The contribution margin for Product R was:
A. $48,750
B. $63,500
C. $51,000
D. $48,000
Contribution margin = CM ratio × Sales = 0.32 × $800,000 = $256,000
Total Sales = R Sales + S Sales + T Sales
$800,000 = $150,000 + S Sales + $200,000
S Sales = $800,000 - ($150,000 + $200,000) = $450,000
S Contribution margin = S CM ratio × S Sales = 0.25 × $450,000 = $112,500
T Contribution margin = T CM ratio × T Sales = 0.40 × $200,000 = $80,000
Total Contribution margin = R Contribution margin + S Contribution margin + T
Contribution margin
$256,000 = R Contribution margin + $112,500 + $80,000
R Contribution margin = $256,000 - ($112,500 + $80,000) = $63,500
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AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
179. The segment margin for Product T was:
A. $45,000
B. $85,000
C. $(10,000)
D. $80,000
Total Traceable fixed expenses = R Traceable fixed expenses + S Traceable fixed expenses +
T Traceable fixed expenses
$120,000 = $25,000 + $60,000 + T Traceable fixed expenses
T Traceable fixed expenses = $120,000 - ($25,000 + $60,000) = $35,000
Contribution margin = CM ratio × Sales = 0.40 × $200,000 = $80,000
T Segment margin = T Contribution margin - T Traceable fixed expenses
= $80,000 - $35,000 = $45,000
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AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Hard
Essay Questions
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Chapter 06: variable costing and segment reporting: tools for management
180. The EG Company produces and sells one 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.
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Chapter 06: variable costing and segment reporting: tools for management
a. Cost per unit under absorption costing:
b. Absorption costing income statement:
c. Variable costing income statement:
d.
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
181. Maga Company, which has only one product, has provided the following data
concerning its most recent month of operations:
Required:
a. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare a contribution format income statement for the month using variable costing.
d. Prepare an income statement for the month using absorption costing.
e. Reconcile the variable costing and absorption costing net operating incomes for the month.
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a. & b. Unit product costs
c. & d. Income statements
e. Reconciliation
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
182. Leigh Company, 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. What is the unit product cost for the month under variable costing?
b. What is the unit product cost for the month under absorption costing?
c. Prepare a contribution format income statement for the month using variable costing.
d. Prepare an income statement for the month using absorption costing.
e. Reconcile the variable costing and absorption costing net operating incomes for the month.
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Chapter 06: variable costing and segment reporting: tools for management
a. & b. Unit product costs
c. & d. Income statements
e. Reconciliation
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
183. Qu Company, which has only one product, has provided the following data concerning
its most recent month of operations:
Required:
a. What is the unit product cost for the month under variable costing?
b. Prepare a contribution format income statement for the month using variable costing.
c. Without preparing an income statement, determine the absorption costing net operating
income for the month. (Hint: Use the reconciliation method.)
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Chapter 06: variable costing and segment reporting: tools for management
a. Variable costing unit product cost
b. Variable costing income statement
c. Computation of absorption costing net operating income
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
184. Packer Company, 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. What is the unit product cost for the month under variable costing?
b. Prepare a contribution format income statement for the month using variable costing.
c. Without preparing an income statement, determine the absorption costing net operating
income for the month. (Hint: Use the reconciliation method.)
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Chapter 06: variable costing and segment reporting: tools for management
a. Variable costing unit product cost
b. Variable costing income statement
c. Computation of absorption costing net operating income
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Hard
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Chapter 06: variable costing and segment reporting: tools for management
185. Hubiak Corporation produces a single product and has the following cost structure:
Required:
Compute the unit product cost under absorption costing. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
159/179
Chapter 06: variable costing and segment reporting: tools for management
186. Hudalla Corporation produces a single product and has the following cost structure:
Required:
Compute the unit product cost under variable costing. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
187. Fellner Corporation produces a single product and has the following cost structure:
Required:
a. Compute the unit product cost under absorption costing. Show your work!
b. Compute the unit product cost under variable costing. Show your work!
a. Absorption costing:
b. Variable costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
188. Bertone Inc., which produces a single product, has provided the following data for its
most recent month of operation:
The company had no beginning or ending inventories.
Required:
Compute the unit product cost under variable costing. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
189. Krasnow Inc., which produces a single product, has provided the following data for its
most recent month of operation:
The company had no beginning or ending inventories.
Required:
Compute the unit product cost under absorption costing. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
190. Cuffee Inc., which produces a single product, has provided the following data for its
most recent month of operation:
The company had no beginning or ending inventories.
Required:
a. Compute the unit product cost under absorption costing. Show your work!
b. Compute the unit product cost under variable costing. Show your work!
a. Absorption costing:
b. Variable costing:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-01 Explain how variable costing differs from absorption costing and compute unit product costs under each method
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
191. UHF Antennas, Inc., produces and sells a unique television antenna. The company has
just opened a new plant to manufacture the antenna, and the following cost and revenue data
have been reported for the first month of the new plant's operation:
Management is anxious to see how profitable the new antenna will be and has asked that an
income statement be prepared for the month. Assume that direct labor is a variable cost.
Required:
a. Assuming that the company uses absorption costing, compute the unit product cost and
prepare an income statement.
b. Assuming that the company uses variable costing, compute the unit product cost and
prepare an income statement.
c. Explain the reason for any difference in the ending inventories under the two costing
methods and the impact of this difference on reported net operating income.
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Chapter 06: variable costing and segment reporting: tools for management
a. Unit product cost under absorption costing:
b. Unit product cost under variable costing:
c.
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
192. O'Keefe Company, 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.
a. Variable costing income statement
b. Absorption costing income statement
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
193. Nesman Company, 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.
a. Variable costing income statement
b. Absorption costing income statement
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Chapter 06: variable costing and segment reporting: tools for management
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-02 Prepare income statements using both variable and absorption costing
Level: Hard
194. Carvey Corporation manufactures a variety of products. The following data pertain to the
company's operations over the last two years:
Required:
a. Determine the absorption costing net operating income for last year. Show your work!
b. Determine the absorption costing net operating income for this year. Show your work!
a. and b.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
195. Last year, Holroyd Corporation's variable costing net operating income was $95,000.
The fixed manufacturing overhead costs deferred in inventory under absorption costing
amounted to $29,000.
Required:
Determine the absorption costing net operating income last year. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
196. Last year, Teneyck Corporation's variable costing net operating income was $63,500 and
ending inventory decreased by 200 units. Fixed manufacturing overhead cost per unit was $5.
Required:
Determine the absorption costing net operating income for last year. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
197. Salonia Corporation manufactures a variety of products. The following data pertain to
the company's operations over the last two years:
Required:
a. Determine the absorption costing net operating income last year. Show your work!
b. Determine the absorption costing net operating income this year. Show your work!
a. and b.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
198. Cassin Corporation manufactures a variety of products. Last year, the company's variable
costing net operating income was $86,300 and ending inventory decreased by 1,700 units.
Fixed manufacturing overhead cost per unit was $8.
Required:
Determine the absorption costing net operating income for last year. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
199. Gordy Corporation manufactures a variety of products. Last year, variable costing net
operating income was $81,000. 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!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-03 Reconcile variable costing and absorption costing net operating incomes and explain why the two amounts differ
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
200. Camren Corporation has two major business segments-Apparel and Accessories. Data
concerning those segments for December appear below:
Common fixed expenses totaled $357,000 and were allocated as follows: $161,000 to the
Apparel business segment and $196,000 to the Accessories business segment.
Required:
Prepare a segmented income statement in the contribution format for the company. Omit
percentages; show only dollar amounts.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
201. The IT Corporation produces and markets two types of electronic calculators: Model 11
and Model 12. The following data were gathered on activities last month:
Required:
Prepare a segmented income statement in the contribution format for last month.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Medium
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Chapter 06: variable costing and segment reporting: tools for management
202. Data for May concerning Dorow Corporation's two major business segments-Fibers and
Feed tocks-appear below:
Common fixed expenses totaled $345,000 and were allocated as follows: $186,000 to the
Fibers business segment and $159,000 to the Feed tocks business segment.
Required:
Prepare a segmented income statement in the contribution format for the company. Omit
percentages; show only dollar amounts.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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Chapter 06: variable costing and segment reporting: tools for management
203. Mossor Corporation has two major business segments-Retail and Wholesale. In
December, the Retail business segment had sales revenues of $510,000, variable expenses of
$296,000, and traceable fixed expenses of $61,000. During the same month, the Wholesale
business segment had sales revenues of $510,000, variable expenses of $240,000, and
traceable fixed expenses of $82,000. Common fixed expenses totaled $191,000 and were
allocated as follows: $113,000 to the Retail business segment and $78,000 to the Wholesale
business segment.
Required:
Prepare a segmented income statement in the contribution format for the company. Omit
percentages; show only dollar amounts.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Application
Learning Objective: 06-04 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use
it to make decisions
Level: Easy
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