Question 1

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

Accepted Answer

A)  electricity per KWH to operate factory equipment 
B)  direct materials cost 
C)  insurance premiums on factory building 
D)  wages of assembly worker 
A)  electricity per KWH to operate factory equipment 
B)  direct materials cost 
C)  insurance premiums on factory building 
D)  wages of assembly worker C

Question 3

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the profit-volume chart.

Accepted Answer

A) True 
 B)False  True

Question 4

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

Accepted Answer

A) True 
 B)False

Question 5

The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

Accepted Answer

A) True 
 B)False

Question 6

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 7

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 8

In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity.

Accepted Answer

A) True 
 B)False

Question 9

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: $$\begin{array} { l l l l } 
& \text { Unit Selling Price } & \text { Unit Variable } & \text { Unit Contribution } \
\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \
\hline \mathrm { X } & \$ 110.00 & \$ 70.00 & \$ 40.00 \
\mathrm { Y } & 70.00 & 50.00 & 20.00
\end{array}$$
-What was Rusty Co.'s unit variable cost of E?

Accepted Answer

A)  $52.50 
B)  $70.00 
C)  $120.00 
D)  $50.00 
A)  $52.50 
B)  $70.00 
C)  $120.00 
D)  $50.00

Question 10

Charlotte Co. has budgeted salary increases to factory supervisors totaling 9%. If selling prices and all other cost relationships are held constant, next year's break-even point

Accepted Answer

A)  will decrease by 9% 
B)  will increase by 9% 
C)  cannot be determined from the data given 
D)  will increase at a rate greater than 9% 
A)  will decrease by 9% 
B)  will increase by 9% 
C)  cannot be determined from the data given 
D)  will increase at a rate greater than 9%

Question 11

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

Accepted Answer

A) True 
 B)False

Question 12

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: $$\begin{array} { l l l l } 
& \text { Unit Selling Price } & \text { Unit Variable } & \text { Unit Contribution } \
\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \
\hline \mathrm { X } & \$ 110.00 & \$ 70.00 & \$ 40.00 \
\mathrm { Y } & 70.00 & 50.00 & 20.00
\end{array}$$
-What was Rusty Co.'s sales mix last year?

Accepted Answer

A)  58% X, 42% Y 
B)  60% X, 40% Y 
C)  30% X, 70% Y 
D)  12.5% X, 87.5% Y 
A)  58% X, 42% Y 
B)  60% X, 40% Y 
C)  30% X, 70% Y 
D)  12.5% X, 87.5% Y

Question 13

If a business sells four products, it is not possible to estimate the break-even point.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

Accepted Answer

A)  electricity per KWH to operate factory equipment 
B)  direct materials cost 
C)  straight-line depreciation on factory equipment 
D)  wages of assembly worker 
A)  electricity per KWH to operate factory equipment 
B)  direct materials cost 
C)  straight-line depreciation on factory equipment 
D)  wages of assembly worker

Question 15

Which of the following conditions would cause the break-even point to decrease?

Accepted Answer

A)  total fixed costs increase 
B)  unit selling price decreases 
C)  unit variable cost decreases 
D)  unit variable cost increases 
A)  total fixed costs increase 
B)  unit selling price decreases 
C)  unit variable cost decreases 
D)  unit variable cost increases

Question 16

If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

Accepted Answer

A) True 
 B)False

Question 17

If yearly insurance premiums are increased, this change in fixed costs will result in an increase in the break-even point.

Accepted Answer

A) True 
 B)False

Question 18

Garmo Co. has an operating leverage of 5. Next year's sales are expected to increase by 10%. The company's operating income will increase by 50%.

Accepted Answer

A) True 
 B)False

Question 19

If fixed costs are $500,000 and the unit contribution margin is $20, what is the break-even point in units if fixed costs are reduced by $80,000?

Accepted Answer

A)  25,000 
B)  29,000 
C)  4,000 
D)  21,000 
A)  25,000 
B)  29,000 
C)  4,000 
D)  21,000

Question 20

Figure 21-1
-Which of the following describes the behavior of the fixed cost per unit?

Accepted Answer

A)  decreases with increasing production 
B)  decreases with decreasing production 
C)  remains constant with changes in production 
D)  increases with increasing production 
A)  decreases with increasing production 
B)  decreases with decreasing production 
C)  remains constant with changes in production 
D)  increases with increasing production

Exam 19: Cost Behavior and Cost-Volume-Profit Analysis

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the profit-volume chart.

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity.

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: Unit Selling Price Unit Variable Unit Contribution Product Price Cost Margin \ 110.00 \ 70.00 \ 40.00 70.00 50.00 20.00 -What was Rusty Co.'s unit variable cost of E?

Charlotte Co. has budgeted salary increases to factory supervisors totaling 9%. If selling prices and all other cost relationships are held constant, next year's break-even point

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: Unit Selling Price Unit Variable Unit Contribution Product Price Cost Margin \ 110.00 \ 70.00 \ 40.00 70.00 50.00 20.00 -What was Rusty Co.'s sales mix last year?

If a business sells four products, it is not possible to estimate the break-even point.

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

Which of the following conditions would cause the break-even point to decrease?

If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

If yearly insurance premiums are increased, this change in fixed costs will result in an increase in the break-even point.

Garmo Co. has an operating leverage of 5. Next year's sales are expected to increase by 10%. The company's operating income will increase by 50%.

If fixed costs are $500,000 and the unit contribution margin is $20, what is the break-even point in units if fixed costs are reduced by $80,000?

Figure 21-1 -Which of the following describes the behavior of the fixed cost per unit?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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