Chapter 23 – Multiple Choice

Which of the following statements is incorrect?

Income computed by the absorption costing method will tend to exceed income computed by the variable costing method if:

Wang Company provides the following information for their first year of operation:

If Wang uses absorption costing, cost of goods sold would be:

Wang Company provides the following information for their first year of operation:

If Wang uses variable costing, operating income would be:

Nina Company has two production departments — fabrication and assembly. These departments are supported by janitorial and engineering service units. Janitorial costs are allocated to the production departments based on square footage while engineering is allocated based on machines in use within each department. The following table reveals relevant facts about the various departments:

Assuming Nina uses the direct method of allocating service department costs, how much is the total cost attributable to the fabrication department?

Nina Company has two production departments — fabrication and assembly. These departments are supported by janitorial and engineering service units. Janitorial costs are allocated to the engineering, fabrication, and assembly departments based on square footage. Engineering is allocated to productive departments based on machines in use within each department. The following table reveals relevant facts about the various departments:

Assuming Nina uses the step method of allocating service department costs, how much is the total cost attributable to the assembly department?

Strickland Company prepared segment information relative to its office furniture manufacturing division. The controllable contribution margin differed from the segment margin by $100,000. This amount corresponds to the:

Maverick Corporation had four operating segments. Information for each segment is included in the following table. Maverick has a threshold rate of return of 7%. Which segment has the largest residual income?