In an Income Statement Prepared Using Variable Costing, Fixed Manufacturing

question 20

Multiple Choice

In an income statement prepared using variable costing, fixed manufacturing overhead would

• A)not be used.
• B)be used in the computation of net operating income but not in the computation of the contribution margin.
• C)be used in the computation of the contribution margin.
• D)be treated the same as variable manufacturing overheaD.

Understand the concept of segment margin and its calculation.

Grasp the relationship between production and sales volume and their impact on net operating income under different costing methods.

Understand how fixed manufacturing overhead costs are treated under variable and absorption costing.

Recognize the importance of not arbitrarily allocating common costs to segments.

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Definitions:

Central Tendency

A statistical measure that identifies a single value as representative of an entire distribution, aiming to provide an accurate description of the entire data set.

Median

The middle value in a data set, which divides the set into two equal halves, with an equal number of data points above and below it.

Mode

The value that appears most frequently in a data set. A mode can be used as a measure of central tendency, especially for categorical data.

Histogram

A type of graph that represents the distribution of numerical data by showing the number of data points that fall into various ranges or bins.