Question 1

The relevant range of activity refers to the

Accepted Answer

A)  geographical areas where the company plans to operate. 
B)  activity level where all costs are curvilinear. 
C)  levels of activity over which the company expects to operate. 
D)  level of activity where all costs are constant. 
A)  geographical areas where the company plans to operate. 
B)  activity level where all costs are curvilinear. 
C)  levels of activity over which the company expects to operate. 
D)  level of activity where all costs are constant. C

Question 2

Stephanie Inc. sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16000. 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 $5000 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. C

Question 3

Which of the following is not a fixed cost?

Accepted Answer

A)  Direct materials 
B)  Depreciation 
C)  Lease charge 
D)  Property taxes 
A)  Direct materials 
B)  Depreciation 
C)  Lease charge 
D)  Property taxes A

Question 4

The margin of safety is the difference between sales at breakeven and sales at a determined activity level.

Accepted Answer

A) True 
 B)False

Question 5

The following information is available for Masun Company: $$\begin{array} { l r l r } 
\text { Sales } & \$ 550,000 & \text { Total fixed expenses } & \$ 150,000 \
\text { Cost of goods sold } & 390,000 & \text { Total variable expenses } & \$ 370,000
\end{array}$$ A CVP income statement would report

Accepted Answer

A)  gross profit of $160000. 
B)  contribution margin of $400000. 
C)  gross profit of $180000. 
D)  contribution margin of $180000. 
A)  gross profit of $160000. 
B)  contribution margin of $400000. 
C)  gross profit of $180000. 
D)  contribution margin of $180000.

Question 6

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 7

Two costs at Bradshaw Company appear below for specific months of operation. $\begin{array}{llrl}
& \underline{\text { Month }}& \underline{\text {Amount}}& \underline{\text { Units Produced }}\
\text { Delivery costs } & \text { September } & \$ 40,000 & 40,000 \
& \text { October } & 55,000 & 60,000 \
\text { Utilities } & \text { September } & \$ 84,000 & 40,000 \
& \text { October } & 126,000 & 60,000
\end{array}$ Which type of costs are these?

Accepted Answer

A)  Delivery costs and utilities are both variable. 
B)  Delivery costs and utilities are both mixed. 
C)  Utilities are mixed and delivery costs are variable. 
D)  Delivery costs are mixed and utilities are variable. 
A)  Delivery costs and utilities are both variable. 
B)  Delivery costs and utilities are both mixed. 
C)  Utilities are mixed and delivery costs are variable. 
D)  Delivery costs are mixed and utilities are variable.

Question 8

Ponszko Nursery used high-low data from June and July to determine its variable cost of $12 per unit. Additional information follows: $$\begin{array} { l c c } 
\text { Month } & \text { Units produced }  &  \text { Total costs } \
\text { June } & 2,000 & \$ 32,000 \
\text { July } & 1,000 & 20,000
\end{array}$$ If Ponszko's produces 2300 units in August how much is its total cost expected to be?

Accepted Answer

A)  $8000 
B)  $39600 
C)  $27600 
D)  $35600 
A)  $8000 
B)  $39600 
C)  $27600 
D)  $35600

Question 9

Pascal Inc. is planning to sell 900000 units for $1.50 per unit. The contribution margin ratio is 20%. If Pascal will break even at this level of sales what are the fixed costs?

Accepted Answer

A)  $270000. 
B)  $630000. 
C)  $900000. 
D)  $1020000. 
A)  $270000. 
B)  $630000. 
C)  $900000. 
D)  $1020000.

Question 10

The following monthly data are available for Seasons Company which produces only one product: Selling price per unit $42; Unit variable expenses $14; Total fixed expenses $42000; Actual sales for the month of June 4000 units. How much is the margin of safety for the company for June?

Accepted Answer

A)  $70000 
B)  $105000 
C)  $63000 
D)  $2500 
A)  $70000 
B)  $105000 
C)  $63000 
D)  $2500

Question 11

Knowledge of cost behavior is important in ______________________ analysis.

Accepted Answer

cost-volum

Question 12

The break-even point is where total sales equal total variable costs.

Accepted Answer

A) True 
 B)False

Question 13

Determine the missing amounts. $\begin{array}{ccccc}
&&&\text { Unit contribution } & \text { Contribution }\
&\text { Unit Selling Price } &\text { Unit Variable Costs } & \text { Margin }&\text { Margin Ratio }\
\hline1 . & \$ 300 & \$ 210 & A & B \
2 . & \$ 600 & C & \$ 210 & \text { D } \
3 & E & F & \$ 360 & 30 \%
\end{array}$

Accepted Answer

A. $300 - $210 = $90
B. $90 ÷

Question 14

Wilton Co. reported the following results from the sale of 5000 hammers in May: sales $200000 variable costs $120000 fixed costs $60000 and net income $20000. Assume that Wilton increases the selling price of hammers by 10% on June 1. How many hammers will have to be sold in June to maintain the same level of net income?

Accepted Answer

A)  4000 
B)  4300 
C)  4500 
D)  5000 
A)  4000 
B)  4300 
C)  4500 
D)  5000

Question 15

If the activity index decreases total variable costs will decrease proportionately.

Accepted Answer

A) True 
 B)False

Question 16

Changes in the level of activity will cause unit variable and unit fixed costs to change in opposite directions.

Accepted Answer

A) True 
 B)False

Question 17

Match between columns
                        Premises: The amount of revenue remaining after deducting variable costs.
Costs that contain both a variable and a fixed element.
The percentage of sales dollars available to cover fixed costs and produce income.
Identifies the activity which causes changes in the behavior of costs.
The difference between actual or expected sales and sales at the break-even point.
Costs that vary in total directly and proportionately with changes in the activity level.
The level of activity at which total revenues equal total costs.
The range over which the company expects to operate during the year.
Costs that remain the same in total regardless of changes in the activity level.
A method that uses the total costs incurred at the high and low levels of activity.

Accepted Answer

The Answer of Activity index and Variable costs and Fixed is...

Question 18

A target net income is calculated by taking actual sales minus the margin of safety.

Accepted Answer

A) True 
 B)False

Question 19

In applying the high-low method what is the fixed cost? $\begin{array}{ccc}
 \text { Month } & \text { Miles } & \text { Total Cost } \
\text { January } & 80,000 & \$ 192,000 \
 \text { February } & 50,000 & 160,000 \
 \text { March } & 70,000 & 188,000 \
 \text { April } & 90,000 & 260,000 \

\end{array}$

Accepted Answer

A)  $35000 
B)  $72000 
C)  $28000 
D)  $100000 
A)  $35000 
B)  $72000 
C)  $28000 
D)  $100000

Question 20

An example of a mixed cost is

Accepted Answer

A)  direct materials. 
B)  supervisory salaries. 
C)  utility costs. 
D)  property taxes. 
A)  direct materials. 
B)  supervisory salaries. 
C)  utility costs. 
D)  property taxes.

Exam 22: Cost-Volume-Profit

The relevant range of activity refers to the

Which of the following is not a fixed cost?

The margin of safety is the difference between sales at breakeven and sales at a determined activity level.

The following information is available for Masun Company: Sales \ 550,000 Total fixed expenses \ 150,000 Cost of goods sold 390,000 Total variable expenses \ 370,000 A CVP income statement would report

The high-low method is criticized because it

Two costs at Bradshaw Company appear below for specific months of operation. Delivery costs September \ 40,000 40,000 October 55,000 60,000 Utilities September \ 84,000 40,000 October 126,000 60,000 Which type of costs are these?

Ponszko Nursery used high-low data from June and July to determine its variable cost of $12 per unit. Additional information follows: Month Units produced Total costs June 2,000 \ 32,000 July 1,000 20,000 If Ponszko's produces 2300 units in August how much is its total cost expected to be?

Pascal Inc. is planning to sell 900000 units for $1.50 per unit. The contribution margin ratio is 20%. If Pascal will break even at this level of sales what are the fixed costs?

The following monthly data are available for Seasons Company which produces only one product: Selling price per unit $42; Unit variable expenses $14; Total fixed expenses $42000; Actual sales for the month of June 4000 units. How much is the margin of safety for the company for June?

Knowledge of cost behavior is important in ______________________ analysis.

The break-even point is where total sales equal total variable costs.

Determine the missing amounts. Unit contribution Contribution Unit Selling Price Unit Variable Costs Margin Margin Ratio 1. \ 300 \ 210 A B 2. \ 600 C \ 210 D 3 E F \ 360 30\%

If the activity index decreases total variable costs will decrease proportionately.

Changes in the level of activity will cause unit variable and unit fixed costs to change in opposite directions.

A target net income is calculated by taking actual sales minus the margin of safety.

In applying the high-low method what is the fixed cost? Month Miles Total Cost January 80,000 \ 192,000 February 50,000 160,000 March 70,000 188,000 April 90,000 260,000

An example of a mixed cost is

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

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