The ______________ income statement classifies cost as variable

154. The ______________ income statement classifies cost as variable or fixed and computes a contribution margin.

155. _________________ tells a company how far sales can drop before it will be operating at a loss.

156. ___________________ is the relative percentage in which a company sells its multiple products.

157. When more than one product is sold, the break-even point can be determined by dividing fixed expenses by _______________________.

158. When a company has ________________, management must decide which products to make and sell in order to maximize net income.

159. ___________________ refers to the relative proportion of fixed versus variable costs that a company incurs.

160. The _________________________ provides a measure of a company’s earnings volatility and can be used to compare companies.

^a161. Under _____________________ all manufacturing costs are charged to, or absorbed by, the product.

^a162. Fixed manufacturing costs are treated as period costs under ______________________.

^a163. When production exceeds sales, a portion of the _____________________ is deferred to a future period as part of the cost of ending inventory under absorption costing, but not under variable costing.

^a164. When units produced exceed units sold, income under absorption costing is ___________ than income under variable costing.

^a 165. Management may be tempted to overproduce in a given period in order to increase net income if _______________ is used for internal decision making.

SHORT-ANSWER ESSAY QUESTIONS

S-A E 166

A CVP income statement is frequently prepared for internal use by management. Describe the features of the CVP income statement that make it more useful for management decision-making than the traditional income statement that is prepared for external users.

S-A E 167

Nancy Sound, president of Crosley Corp., has heard about operating leverage and asks you to explain this term. What is operating leverage? How does a company increase its operating leverage?

^aS-A E 168

Define variable costing and absorption costing. What are some of the benefits to a manager from using variable costing instead of absorption costing for internal decision making?

^aS-A E 169

How do differences in production and sales levels affect income under absorption and variable costing?