Chapter 7 smartbook part.1

Question 1

When using absorption costing, fixed manufacturing overhead cost per unit = Total fixed manufacturing overhead cost divided by units:

Multiple choice question.

sold.

in ending inventory.

produced.

(produced – units sold).

Answer 1

produced.

Question 2

Absorption costing treats fixed manufacturing overhead as a ______ cost.

Answer 2

product

Question 3

Why is CVP analysis more difficult when using absorption costing than when using variable costing?

Fixed manufacturing overhead is ignored when performing CVP analysis.

CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing.

Selling and administrative costs are ignored when performing CVP analysis.

CVP analysis requires costs to be broken down into product and period costs, which is not done in absorption costing.

Answer 3

CVP analysis requires costs to be broken down between variable and fixed which is not done in absorption costing.

Question 4

Costs that can be traced directly to a segment ______.

should be allocated to all segments

should not be allocated to other segments

may be treated as common costs

Answer 4

should not be allocated to other segments