Ch 06 - Variable Costing and Segment Reporting

Question 1

Absorption costing

Answer 1

A costing method that includes all manufacturing costs, direct materials, direct labor, and both variable and fixed manufacturing overhead in unit product costs. (p. 230)

Question 2

Common fixed cost

Answer 2

A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments. (p. 240)

Question 3

Segment

Answer 3

Any part or activity of an organization about which managers seek cost, revenue, or profit data. (p. 230)

Question 4

Segment margin

Answer 4

A segment’s contribution margin less its traceable fixed costs. It represents the margin available after a segment has covered all of its own traceable costs. (p. 241)

Question 5

Traceable fixed cost

Answer 5

A fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated. (p. 240)

Question 6

Variable costing

Answer 6

A costing method that includes only the variable portion of manufacturing costs (direct materials, direct labor, and variable manufacturing overhead in unit product costs). (p. 230)