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

The contribution margin is viewed as a better gauge of the long run profitability of a segment than the segment margin.

What was the absorption costing net operating income last year?

What is the net operating income for the month under variable costing?

The contribution margin for Product R was:

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:

What is the net operating income for the month under absorption costing?

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

When production is less than sales for the period, absorption costing net operating income will generally be less than variable costing net operating income.

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:

The contribution margin per unit would be:

In segment reporting, sales dollars is usually an appropriate allocation base for selling, general, and administrative expenses.

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:

The total gross margin for the month under the absorption costing approach is:

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:

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.

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!

If Lemine produces and sells only 6,000 units, what is the unit product cost under each of the following methods?

The break-even point in units for the month under variable costing is:

The contribution margin of the South business segment is:

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.