Question 1

A fixed cost is a cost which

Accepted Answer

A)  varies in total with changes in the level of activity. 
B)  remains constant per unit with changes in the level of activity. 
C)  varies inversely in total with changes in the level of activity. 
D)  remains constant in total with changes in the level of activity. 
A)  varies in total with changes in the level of activity. 
B)  remains constant per unit with changes in the level of activity. 
C)  varies inversely in total with changes in the level of activity. 
D)  remains constant in total with changes in the level of activity.

Question 2

The equation which reflects a CVP income statement is

Accepted Answer

A)  Sales = Cost of goods sold + Operating expenses + Net income. 
B)  Sales + Fixed costs = Variable costs + Net income. 
C)  Sales - Variable costs + Fixed costs = Net income. 
D)  Sales - Variable costs - Fixed costs = Net income. 
A)  Sales = Cost of goods sold + Operating expenses + Net income. 
B)  Sales + Fixed costs = Variable costs + Net income. 
C)  Sales - Variable costs + Fixed costs = Net income. 
D)  Sales - Variable costs - Fixed costs = Net income.

Question 3

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 4

CVP analysis does not consider

Accepted Answer

A)  level of activity. 
B)  fixed cost per unit. 
C)  variable cost per unit. 
D)  sales mix. 
A)  level of activity. 
B)  fixed cost per unit. 
C)  variable cost per unit. 
D)  sales mix.

Question 5

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 6

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 7

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 8

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.

Question 9

Portman Company's activity for the first three months of 2019 are as follows: $\begin{array}{lll}&\text { Machine Hours}&\text {  Electrical Cost }\
\text { January } & 2,100 & \$ 4,800 \
\text { February } & 2,600 & \$ 5,800 \
\text { March } & 2,900 & \$ 6,400
\end{array}$ Using the high-low method, how much is the cost per machine hour?

Accepted Answer

A)  $2.00 
B)  $3.00 
C)  $2.26 
D)  $1.78 
A)  $2.00 
B)  $3.00 
C)  $2.26 
D)  $1.78

Question 10

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

Accepted Answer

A)  20,000. 
B)  7,000. 
C)  5,000. 
D)  6,000. 
A)  20,000. 
B)  7,000. 
C)  5,000. 
D)  6,000.

Question 11

For an activity base to be useful in cost behavior analysis,

Accepted Answer

A)  the activity should always be stated in dollars. 
B)  there should be a correlation between changes in the level of activity and changes in costs. 
C)  the activity should always be stated in terms of units. 
D)  the activity level should be constant over a period of time. 
A)  the activity should always be stated in dollars. 
B)  there should be a correlation between changes in the level of activity and changes in costs. 
C)  the activity should always be stated in terms of units. 
D)  the activity level should be constant over a period of time.

Question 12

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Accepted Answer

A) True 
 B)False

Question 13

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Accepted Answer

A) True 
 B)False

Question 14

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

Accepted Answer

A)  $40,000 
B)  $52,000 
C)  $0 
D)  $28,000 
A)  $40,000 
B)  $52,000 
C)  $0 
D)  $28,000

Question 15

Walters Corporation sells radios for $50 per unit. The fixed costs are $525,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $125,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Accepted Answer

A)  26,250 
B)  26,000 
C)  25,750 
D)  21,000 
A)  26,250 
B)  26,000 
C)  25,750 
D)  21,000

Question 16

The margin of safety is the difference between contribution margin and fixed costs.

Accepted Answer

A) True 
 B)False

Question 17

Keene, Inc. produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $5.60 per unit for a total of $5,600 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Keene?

Accepted Answer

A)  It is 10% higher than the original break-even point. 
B)  It decreases about 16 units. 
C)  It decreases about 40 units. 
D)  It depends on the number of units the company expects to produce and sell. 
A)  It is 10% higher than the original break-even point. 
B)  It decreases about 16 units. 
C)  It decreases about 40 units. 
D)  It depends on the number of units the company expects to produce and sell.

Question 18

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's break-even point in units?

Accepted Answer

A)  32,728. 
B)  40,000. 
C)  51,112. 
D)  56,250. 
A)  32,728. 
B)  40,000. 
C)  51,112. 
D)  56,250.

Question 19

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Accepted Answer

A) True 
 B)False

Question 20

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Accepted Answer

A)  25% 
B)  45% 
C)  30% 
D)  55% 
A)  25% 
B)  45% 
C)  30% 
D)  55%

A fixed cost is a cost which

The equation which reflects a CVP income statement is

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

CVP analysis does not consider

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

In using the high-low method, the fixed cost

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

The relevant range of activity refers to the

Portman Company's activity for the first three months of 2019 are as follows: Machine Hours Electrical Cost January 2,100 \ 4,800 February 2,600 \ 5,800 March 2,900 \ 6,400 Using the high-low method, how much is the cost per machine hour?

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

For an activity base to be useful in cost behavior analysis,

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

The margin of safety is the difference between contribution margin and fixed costs.

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's break-even point in units?

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 5: Cost-Volume-Profit

A fixed cost is a cost which

The equation which reflects a CVP income statement is

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

CVP analysis does not consider

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

In using the high-low method, the fixed cost

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

The relevant range of activity refers to the

Portman Company's activity for the first three months of 2019 are as follows: Machine Hours Electrical Cost January 2,100 \ 4,800 February 2,600 \ 5,800 March 2,900 \ 6,400 Using the high-low method, how much is the cost per machine hour?

Cunningham, Inc. sells MP3 players for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many MP3 players must Cunningham sell to earn net income of $280,000?

For an activity base to be useful in cost behavior analysis,

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

Wendy Industries produces only one product. Monthly fixed expenses are $12,000, monthly unit sales are 4,000, and the unit contribution margin is $10. How much is monthly net income?

The margin of safety is the difference between contribution margin and fixed costs.

Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $360,000. What is Boswell's break-even point in units?

If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

Aero, Inc. requires sales of $2,000,000 to cover its fixed costs of $600,000 and to earn net income of $500,000. What percent are variable costs of sales?

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters