Question 1

Which of the following is the term for a cost that does NOT change in total despite wide changes in volume?

Accepted Answer

A)  Fixed cost 
B)  Variable cost 
C)  Mixed cost 
D)  Sunk cost 
A)  Fixed cost 
B)  Variable cost 
C)  Mixed cost 
D)  Sunk cost

Question 2

Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double.

Accepted Answer

A) True 
 B)False

Question 3

Allston Products sells a special kind of effects pedal for musical performers. Each unit sells for $20.00. Additional data for the month of April, 2011, are as follows:
$$\begin{array} { | l | r | r | } 
\hline \text { Direct materials } & \$ 4.00 & \text { per unit } \
\hline \text { Direct labor } & \$ 8.00 & \text { per unit } \
\hline \text { Variable manuf. overhead } & \$ 20,000 & \text { per month } \
\hline \text { Fixed manuf. ovehead } & \$ 14,000 & \text { per month } \
\hline \text { Operating Experses } & \$ 21,000 & \text { per month } \
\hline & & \
\hline \text { Bepinging inventory } & 0 & \text { units } \
\hline \text { Units produced } & 8,000 & \text { units } \
\hline \text { Units sold } & 7,500 & \text { units } \
\hline \text { Ending inventory } & 500 & \text { units } \
\hline
\end{array}$$
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Using variable costing, how much is the net operating income for April?

Accepted Answer

A)  $6,900 
B)  $7,480 
C)  $7,125 
D)  $6,250 
A)  $6,900 
B)  $7,480 
C)  $7,125 
D)  $6,250

Question 4

Which of the following statements is CORRECT if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant?

Accepted Answer

A)  The contribution margin increases. 
B)  The breakeven point increases. 
C)  The contribution margin decreases. 
D)  The breakeven point decreases. 
A)  The contribution margin increases. 
B)  The breakeven point increases. 
C)  The contribution margin decreases. 
D)  The breakeven point decreases.

Question 5

JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. If the volume increases to 50,000 units, what will the total costs be?

Accepted Answer

A)  $375,000 
B)  $472,500 
C)  $397,500 
D)  $330,000 
A)  $375,000 
B)  $472,500 
C)  $397,500 
D)  $330,000

Question 6

Becky's Bakery sells three large muffins for every two small ones. A small muffin sells for $3, with a variable cost of $2.00. A large muffin sells for $5 with a variable cost of $2.50. Fixed costs are $3,000 per month. How much is the breakeven in terms of total units? (Please round to the nearest whole number.)

Accepted Answer

A)  1,240 
B)  1,579 
C)  946 
D)  1,180 
A)  1,240 
B)  1,579 
C)  946 
D)  1,180

Question 7

Which of the following is the term for a cost that changes in total in direct proportion to a change in volume?

Accepted Answer

A)  Fixed cost 
B)  Variable cost 
C)  Mixed cost 
D)  Sunk cost 
A)  Fixed cost 
B)  Variable cost 
C)  Mixed cost 
D)  Sunk cost

Question 8

Which of the following is the term for a cost that is part variable and part fixed?

Accepted Answer

A)  Fixed cost 
B)  Variable cost 
C)  Mixed cost 
D)  Sunk cost 
A)  Fixed cost 
B)  Variable cost 
C)  Mixed cost 
D)  Sunk cost

Question 9

CVP graphs can help managers quickly estimate the profit or loss earned at different levels of sales volume.

Accepted Answer

A) True 
 B)False

Question 10

In a CVP graph, what does the line which begins at the lower left corner represent?

Accepted Answer

A)  Total sales revenue 
B)  Total variable cost 
C)  Total fixed cost 
D)  Both the total variable cost and the total sales revenue 
A)  Total sales revenue 
B)  Total variable cost 
C)  Total fixed cost 
D)  Both the total variable cost and the total sales revenue

Question 11

Argyle sells steel beams to building contractors in two sizes-regular and heavy. Argyle sells 4 regular beams for every one heavy beam. Cost data are as follows:
$$\begin{array} { | l | r | r | } 
\hline & { \text { Regular } } & { \text { Heavy } } \
\hline \text { Price per unit } & \$ 20.0 0& \$ 28.00 \
\hline \text { Variable cost per unit } & \$ 16.00 & \$ 20.00\
\hline
\end{array}$$
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How much is the weighted average contribution margin per unit?

Accepted Answer

A)  $5.20 
B)  $6.00 
C)  $4.80 
D)  $4.15 
A)  $5.20 
B)  $6.00 
C)  $4.80 
D)  $4.15

Question 12

Olympus Company sells 1,400 units per month at a price of $28.00 per unit. The variable cost is $22.50 per unit. Fixed costs are $6,900 per month. How much is the operating income?

Accepted Answer

A)  $9,500 
B)  $32,300 
C)  $800 
D)  $750 
A)  $9,500 
B)  $32,300 
C)  $800 
D)  $750

Question 13

Arlington Company's highest point of total cost was $61,875 in June. Their point of lowest cost was $52,250 in December. The company makes a single product. Production volume in June was 7,000 units; production volume in December was 12,500 units. If the production volume is 9,000 units, what will the total costs be?

Accepted Answer

A)  $55,000 
B)  $55,750 
C)  $45,600 
D)  $57,062 
A)  $55,000 
B)  $55,750 
C)  $45,600 
D)  $57,062

Question 14

If fixed costs go up and all other factors remain the same, the company will have to sell fewer units to break even.

Accepted Answer

A) True 
 B)False

Question 15

CVP analysis assumes that the ONLY factor that affects costs is change in volume.

Accepted Answer

A) True 
 B)False

Question 16

Juan Martinez played classical guitar professionally until his motorcycle accident left him disabled. After long months of therapy, he hired an experienced luthier (maker of stringed instruments) and opened a small shop that makes and sells Spanish guitars. The guitars sell for $600, and the fixed monthly operating costs are as follows:
$$\begin{array} { l r } 
\text { Rent and utilities } & \$ 960 \
\text { Wages and benefits of luthier } & \$ 1,500 \
\text { Other } & \$ 900
\end{array}$$
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Juan got confused when his accountant told him about contribution margin ratios, but he understood clearly that for every dollar of sales, $0.70 went to cover his fixed costs, and that anything past that point was pure profit.
Juan wishes to make $2,500 of operating profit each month. If so, how many guitars will Juan have to sell?

Accepted Answer

A)  12 
B)  14 
C)  18 
D)  9 
A)  12 
B)  14 
C)  18 
D)  9

Question 17

JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. How much is the variable cost per unit? (Please round to the nearest cent.)

Accepted Answer

A)  $9.45 
B)  $2.78 
C)  $7.50 
D)  $1.95 
A)  $9.45 
B)  $2.78 
C)  $7.50 
D)  $1.95

Question 18

If a company uses standard absorption costing, how could a business manager exploit that accounting method in order to boost book income without violating the rules of GAAP?

Accepted Answer

A)  By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing inventory, which would in turn, help boost book income. 
B)  By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher income. 
C)  By reducing inventory levels, the manager could show higher sales revenues, and thus report higher book income. 
D)  By building up inventory levels, fixed manufacturing costs could be "stored up" in inventory, the cost of goods sold would be lower, and book income would be higher. 
A)  By adopting just-in-time inventory management, the manager could reduce the costs of financing and storing inventory, which would in turn, help boost book income. 
B)  By coding administrative costs to inventory, the manager could report lower total expenses and thus report higher income. 
C)  By reducing inventory levels, the manager could show higher sales revenues, and thus report higher book income. 
D)  By building up inventory levels, fixed manufacturing costs could be "stored up" in inventory, the cost of goods sold would be lower, and book income would be higher.

Question 19

Which of the following statements is CORRECT with respect to total fixed costs, within the relevant range?

Accepted Answer

A)  They will remain the same as production levels change. 
B)  They will increase as production decreases. 
C)  They will decrease as production decreases. 
D)  They will decrease as production increases. 
A)  They will remain the same as production levels change. 
B)  They will increase as production decreases. 
C)  They will decrease as production decreases. 
D)  They will decrease as production increases.

Question 20

Arlington Company's highest point of total cost was $61,875 in June. Their point of lowest cost was $52,250 in December. The company makes a single product. Production volume in June was 7,000 units; production volume in December was 12,500 units. How much is the fixed cost per month?

Accepted Answer

A)  $9,625 
B)  $42,500 
C)  $40,000 
D)  $21,875 
A)  $9,625 
B)  $42,500 
C)  $40,000 
D)  $21,875

Which of the following is the term for a cost that does NOT change in total despite wide changes in volume?

Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double.

Which of the following statements is CORRECT if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant?

JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. If the volume increases to 50,000 units, what will the total costs be?

Which of the following is the term for a cost that changes in total in direct proportion to a change in volume?

Which of the following is the term for a cost that is part variable and part fixed?

CVP graphs can help managers quickly estimate the profit or loss earned at different levels of sales volume.

In a CVP graph, what does the line which begins at the lower left corner represent?

Olympus Company sells 1,400 units per month at a price of $28.00 per unit. The variable cost is $22.50 per unit. Fixed costs are $6,900 per month. How much is the operating income?

If fixed costs go up and all other factors remain the same, the company will have to sell fewer units to break even.

CVP analysis assumes that the ONLY factor that affects costs is change in volume.

JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. How much is the variable cost per unit? (Please round to the nearest cent.)

If a company uses standard absorption costing, how could a business manager exploit that accounting method in order to boost book income without violating the rules of GAAP?

Which of the following statements is CORRECT with respect to total fixed costs, within the relevant range?

Arlington Company's highest point of total cost was $61,875 in June. Their point of lowest cost was $52,250 in December. The company makes a single product. Production volume in June was 7,000 units; production volume in December was 12,500 units. How much is the fixed cost per month?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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Exam 19: Cost-Volume-Profit Analysis

Which of the following is the term for a cost that does NOT change in total despite wide changes in volume?

Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double.

Which of the following statements is CORRECT if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant?

JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. If the volume increases to 50,000 units, what will the total costs be?

Which of the following is the term for a cost that changes in total in direct proportion to a change in volume?

Which of the following is the term for a cost that is part variable and part fixed?

CVP graphs can help managers quickly estimate the profit or loss earned at different levels of sales volume.

In a CVP graph, what does the line which begins at the lower left corner represent?

Olympus Company sells 1,400 units per month at a price of $28.00 per unit. The variable cost is $22.50 per unit. Fixed costs are $6,900 per month. How much is the operating income?

If fixed costs go up and all other factors remain the same, the company will have to sell fewer units to break even.

CVP analysis assumes that the ONLY factor that affects costs is change in volume.

JB Company has fixed costs of $300,000. Total costs, both fixed and variable, are $378,000 when 40,000 units are produced. How much is the variable cost per unit? (Please round to the nearest cent.)

If a company uses standard absorption costing, how could a business manager exploit that accounting method in order to boost book income without violating the rules of GAAP?

Which of the following statements is CORRECT with respect to total fixed costs, within the relevant range?

Arlington Company's highest point of total cost was $61,875 in June. Their point of lowest cost was $52,250 in December. The company makes a single product. Production volume in June was 7,000 units; production volume in December was 12,500 units. How much is the fixed cost per month?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters