It Is Critical for Management to Understand Its Overall Sales

question 59

Multiple Choice

It is critical for management to understand its overall sales mix when using contribution margin income statements because

• A)variable cost allocations between products may be difficult to determine.
• B)fixed cost allocations between products may be difficult to determine.
• C)overhead allocation must be spread evenly across all product lines.
• D)different products can have widely differing contribution margins even with the same level of sales.

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Definitions:

Manufacturing Overhead

All manufacturing costs that are not directly associated with the direct labor or direct materials used in production.

Schedule of Cost

A detailed statement outlining the various components of total cost, including direct and indirect costs, used for analysis, planning, and control.

Goods Manufactured

The complete units of product that have been produced within a certain period of time.

Overapplied Overhead

A condition in which the overhead costs assigned to manufacturing exceed the real overhead costs that were incurred.