Question 1

The high-low method is criticized because it

Accepted Answer

A) is not a graphical method. 
B) is a mathematical method. 
C) ignores much of the available data by concentrating on only the extreme points. 
D) doesn't provide reasonable estimates. 
A) is not a graphical method. 
B) is a mathematical method. 
C) ignores much of the available data by concentrating on only the extreme points. 
D) doesn't provide reasonable estimates.

Question 2

The break-even point is equal to the fixed costs plus net income.

Accepted Answer

A) True 
 B)False

Question 3

For analysis purposes, the high-low method usually produces a(n)

Accepted Answer

A) reasonable estimate. 
B) precise estimate. 
C) overstated estimate. 
D) understated estimate. 
A) reasonable estimate. 
B) precise estimate. 
C) overstated estimate. 
D) understated estimate.

Question 4

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

Accepted Answer

A) Labor specialization 
B) Overtime wages 
C) Total variable costs are constant within the relevant range 
D) Availability of quantity discounts 
A) Labor specialization 
B) Overtime wages 
C) Total variable costs are constant within the relevant range 
D) Availability of quantity discounts

Question 5

The amount by which actual or expected sales exceeds break-even sales is referred to as

Accepted Answer

A) contribution margin. 
B) unanticipated profit. 
C) margin of safety. 
D) target net income. 
A) contribution margin. 
B) unanticipated profit. 
C) margin of safety. 
D) target net income.

Question 6

A company has total fixed costs of $240,000 and a contribution margin ratio of 20%. The total sales necessary to break even are

Accepted Answer

A) $960,000. 
B) $1,200,000. 
C) $300,000. 
D) $288,000. 
A) $960,000. 
B) $1,200,000. 
C) $300,000. 
D) $288,000.

Question 7

Within the relevant range, the variable cost per unit

Accepted Answer

A) differs at each activity level. 
B) remains constant at each activity level. 
C) increases as production increases. 
D) decreases as production increases. 
A) differs at each activity level. 
B) remains constant at each activity level. 
C) increases as production increases. 
D) decreases as production increases.

Question 8

For planning purposes, mixed costs are generally grouped with fixed costs.

Accepted Answer

A) True 
 B)False

Question 9

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $35,000. How much is the selling price per unit?

Accepted Answer

A) $45.00 
B) $10.00 
C) $17.50 
D) $27.50 
A) $45.00 
B) $10.00 
C) $17.50 
D) $27.50

Question 10

How much sales are required to earn a target income of $240,000 if total fixed costs are $300,000 and the contribution margin ratio is 40%?

Accepted Answer

A) $900,000 
B) $600,000 
C) $1,350,000 
D) $990,000 
A) $900,000 
B) $600,000 
C) $1,350,000 
D) $990,000

Question 11

The high-low method is used in classifying a mixed cost into its variable and fixed elements.

Accepted Answer

A) True 
 B)False

Question 12

Cost behavior analysis is a study of how a firm's costs

Accepted Answer

A) relate to competitors' costs. 
B) relate to general price level changes. 
C) respond to changes in the level of business activity. 
D) respond to changes in the gross national product. 
A) relate to competitors' costs. 
B) relate to general price level changes. 
C) respond to changes in the level of business activity. 
D) respond to changes in the gross national product.

Question 13

Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $110, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio?

Accepted Answer

A) 45% 
B) 55% 
C) 150% 
D) 182% 
A) 45% 
B) 55% 
C) 150% 
D) 182%

Question 14

Which of the following is not a mixed cost?

Accepted Answer

A) Car rental fee 
B) Electricity 
C) Depreciation 
D) Telephone Expense 
A) Car rental fee 
B) Electricity 
C) Depreciation 
D) Telephone Expense

Question 15

Stephanie, Inc. sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16,000. The company is considering the purchase of an automated machine that will result in a $2 reduction in unit variable costs and an increase of $5,000 in fixed costs. Which of the following is true about the break-even point in units?

Accepted Answer

A) It will remain unchanged. 
B) It will decrease. 
C) It will increase. 
D) It cannot be determined from the information provided. 
A) It will remain unchanged. 
B) It will decrease. 
C) It will increase. 
D) It cannot be determined from the information provided.

Question 16

How much sales are required to earn a target net income of $200,000 if total fixed costs are $250,000 and the contribution margin ratio is 40%?

Accepted Answer

A) $625,000 
B) $1,012,500 
C) $1,125,000 
D) $500,000 
A) $625,000 
B) $1,012,500 
C) $1,125,000 
D) $500,000

Question 17

In using the high-low method, the fixed cost

Accepted Answer

A) is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B) is determined by adding the total variable cost to the total cost at the low activity level. 
C) is determined before the total variable cost. 
D) may be determined by subtracting the total variable cost from either the total cost at the low or high activity level. 
A) is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. 
B) is determined by adding the total variable cost to the total cost at the low activity level. 
C) is determined before the total variable cost. 
D) may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

Question 18

Changes in activity have a(n) _________ effect on fixed costs per unit.

Accepted Answer

A) positive 
B) negative 
C) inverse 
D) neutral 
A) positive 
B) negative 
C) inverse 
D) neutral

Question 19

Contribution margin is

Accepted Answer

A) the amount of revenue remaining after deducting fixed costs. 
B) available to cover fixed costs and contribute to income for the company. 
C) sales less fixed costs. 
D) unit selling price less unit fixed costs. 
A) the amount of revenue remaining after deducting fixed costs. 
B) available to cover fixed costs and contribute to income for the company. 
C) sales less fixed costs. 
D) unit selling price less unit fixed costs.

Question 20

The CVP income statement

Accepted Answer

A) is distributed internally and externally. 
B) classifies costs by functions. 
C) discloses contribution margin in the body of the statement. 
D) will reflect a different net income than the traditional income statement. 
A) is distributed internally and externally. 
B) classifies costs by functions. 
C) discloses contribution margin in the body of the statement. 
D) will reflect a different net income than the traditional income statement.

Exam 17: Cost-Volume-Profit

The high-low method is criticized because it

The break-even point is equal to the fixed costs plus net income.

For analysis purposes, the high-low method usually produces a(n)

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion?

The amount by which actual or expected sales exceeds break-even sales is referred to as

A company has total fixed costs of $240,000 and a contribution margin ratio of 20%. The total sales necessary to break even are

Within the relevant range, the variable cost per unit

For planning purposes, mixed costs are generally grouped with fixed costs.

At the break-even point of 2,000 units, variable costs are $55,000, and fixed costs are $35,000. How much is the selling price per unit?

How much sales are required to earn a target income of $240,000 if total fixed costs are $300,000 and the contribution margin ratio is 40%?

The high-low method is used in classifying a mixed cost into its variable and fixed elements.

Cost behavior analysis is a study of how a firm's costs

Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $110, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio?

Which of the following is not a mixed cost?

How much sales are required to earn a target net income of $200,000 if total fixed costs are $250,000 and the contribution margin ratio is 40%?

In using the high-low method, the fixed cost

Changes in activity have a(n) _________ effect on fixed costs per unit.

Contribution margin is

The CVP income statement

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters