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6. Garcia's inventory increased during the year. On the basis of this information, income reported under absorption costing: a. will be the same as that reported under variable costing. b. will be higher than that reported under variable costing. c. will be lower than that reported under variable costing d. will differ from that reported under variable costing, the direction of which cannot be determined from the information given. 7. In an income statement segmented by product line, the salary of the corporation chief executive officer (CEO) should be: a. b. classified as a traceable fixed expense and allocated to the product lines. allocated to the product lines on the basis of sales dollars. allocated to the product lines on the basis of segment margin. c. d. classified as a common fixed expense and not allocated the product lines. 8. Linden Company segments its income statement into three sales territories. The CFO wants to know the effect of dropping one of the three sales territories at the beginning of last year on overall company profit. What is the best number for the CFO to look at to determine the effect of this segment elimination on the net income of the company as a whole? a. the sales territory's sales dollars. b. the sales territory's contribution margin. c. the sales territory's segment margin. d. the sales territory's 'segment margin minus an allocated portion of common fixe expenses. 9. Which of the following is NOT a benefit of the budgeting process? It plays an important role in communication within the organization a. b. It builds organizational slack. c. d. It helps managers to plan for the future It serves an important role in motivating and rewarding employees 10. Which of the following is correct to make budgets to be successful? a. Budgets should be set at a level that is difficult to achieve, for maximum motivation b. Employees affected by a budget should be consulted when it is prepared. c. Budgets should be prepared only by top management and then assigned to other manag within the organization. d. Budgets must have a considerable slack built into them. 11. Which of the following would depict the logical order for preparing (1) a production budget, (2) a cash budget, (3) a sales budget, and (4) a direct labor budget? a. 1-3-4-2 b. 2-3-1-4 c. 3-1-4-2 d. 2-1-3-4