Question 1

If total costs are $30,000 at an output of 3,000 units and $35,000 at an output of 3,500 units, variable costs per unit are:

Accepted Answer

A) $15 per unit. 
B) $20 per unit. 
C) $10 per unit. 
D) $12 per unit. 
A) $15 per unit. 
B) $20 per unit. 
C) $10 per unit. 
D) $12 per unit.

Question 2

On a profit-volume chart, the slope of the graph is equal to:

Accepted Answer

A) profit per unit. 
B) variable costs per unit. 
C) contribution margin per unit. 
D) fixed plus variable costs per unit. 
A) profit per unit. 
B) variable costs per unit. 
C) contribution margin per unit. 
D) fixed plus variable costs per unit.

Question 3

The organisation more likely to be highly operationally geared is:

Accepted Answer

A) Internet service provider. 
B) Vehicle manufacturer. 
C) Takeaway food outlet. 
D) Hairdresser. 
A) Internet service provider. 
B) Vehicle manufacturer. 
C) Takeaway food outlet. 
D) Hairdresser.

Question 4

Use the information below to answer the following questions.
Travel Made Easy Ltd provides three services: International travel, Interstate travel, and Holiday Packages. The results for the year were as follows: $$\begin{array} { l r r c r } 
& \text { International } & \text { Interstate } & \text { Packages } & \text { Total } \
\hline\text { Revenue } & \$ 200,000 & \$ 200,000 & \$ 100,000 & \$ 500,000 \
\text { Variable costs } & \underline{ 50,000}&  \underline{60,000} &  \underline{40,000 }& \underline{ 150,000 }\
\text { Contribution } & 150,000 & 140,000 & 60,000 & 350,000 \
\text { Fixed costs } &  \underline{90,000}&  \underline{90,000} &  \underline{90,000 }&  \underline{270,000} \
\text { Net Profit } &  \underline{\$ 60,000} & \underline{ \$ 50,000 }& \underline{ ( \$ 30,000 )} & \underline{ \$ 80,000} \
\end{array}$$ The Fixed costs have been shared equally between the three functions.
-Refer to the table above. Assume that Travel Made Easy can sublet the space occupied by the Holiday Packages for $50,000 per annum. The best advice to management is:

Accepted Answer

A) to close the service and save $40,000. 
B) do not close the service, because profit would decrease by $10,000. 
C) do not close the service, because profit would decrease by $40,000. 
D) to close the service, and the business would make a profit of $130,000. 
A) to close the service and save $40,000. 
B) do not close the service, because profit would decrease by $10,000. 
C) do not close the service, because profit would decrease by $40,000. 
D) to close the service, and the business would make a profit of $130,000.

Question 5

High operating gearing refers to:

Accepted Answer

A) an activity with fixed costs equal to its variable costs. 
B) an activity with relatively high variable costs compared with its fixed costs. 
C) an activity with relatively low fixed costs compared with its variable costs. 
D) an activity with relatively high fixed costs compared with its variable costs. 
A) an activity with fixed costs equal to its variable costs. 
B) an activity with relatively high variable costs compared with its fixed costs. 
C) an activity with relatively low fixed costs compared with its variable costs. 
D) an activity with relatively high fixed costs compared with its variable costs.

Question 6

On a profit-volume chart, the output where the graph line crosses the axis is the output where:

Accepted Answer

A) profit equals zero. 
B) the firm breaks even. 
C) fixed costs are zero. 
D) Both A and B. 
A) profit equals zero. 
B) the firm breaks even. 
C) fixed costs are zero. 
D) Both A and B.

Question 7

The term 'relevant range,' means the range:

Accepted Answer

A) over which costs are relevant. 
B) of activity within which an entity would normally operate. 
C) where the firm will break-even. 
D) over which the firm has a margin of safety. 
A) over which costs are relevant. 
B) of activity within which an entity would normally operate. 
C) where the firm will break-even. 
D) over which the firm has a margin of safety.

Question 8

Which of these would be considered a fixed cost?

Accepted Answer

A) Cost of fuel for a transport company. 
B) Laundry costs to wash towels used by a hairdresser. 
C) Insurance premium. 
D) Materials used in production. 
A) Cost of fuel for a transport company. 
B) Laundry costs to wash towels used by a hairdresser. 
C) Insurance premium. 
D) Materials used in production.

Question 9

Use the information below to answer the following questions.
Travel Made Easy Ltd provides three services: International travel, Interstate travel, and Holiday Packages. The results for the year were as follows: $$\begin{array} { l r r c r } 
& \text { International } & \text { Interstate } & \text { Packages } & \text { Total } \
\hline\text { Revenue } & \$ 200,000 & \$ 200,000 & \$ 100,000 & \$ 500,000 \
\text { Variable costs } & \underline{ 50,000}&  \underline{60,000} &  \underline{40,000 }& \underline{ 150,000 }\
\text { Contribution } & 150,000 & 140,000 & 60,000 & 350,000 \
\text { Fixed costs } &  \underline{90,000}&  \underline{90,000} &  \underline{90,000 }&  \underline{270,000} \
\text { Net Profit } &  \underline{\$ 60,000} & \underline{ \$ 50,000 }& \underline{ ( \$ 30,000 )} & \underline{ \$ 80,000} \
\end{array}$$ The Fixed costs have been shared equally between the three functions.
-Refer to the table above. Management is contemplating closing the Holiday Packages service; this would involve a cost saving of $40,000 per annum, namely, the variable costs. The fixed costs are not expected to change. The best advice to management is:

Accepted Answer

A) close the service, and the business would make a profit of $110,000. 
B) do not close the service, because profit would decrease by $60,000. 
C) close the service and save $40,000. 
D) do not close the service, because profit would decrease by $90,000. 
A) close the service, and the business would make a profit of $110,000. 
B) do not close the service, because profit would decrease by $60,000. 
C) close the service and save $40,000. 
D) do not close the service, because profit would decrease by $90,000.

Question 10

Pretty Dolls Pty Ltd usually sell 30,000 dolls per annum. This year, they have excess stock of 10,000 dolls; they usually retail the dolls at $35 per unit. Their variable cost per unit is $20 and their annual fixed costs are $30,000. They have received 'a one time only expression of interest' from an overseas retail chain to purchase 7,500 units at $29 per unit. What would be the best advice you could provide to Pretty Dolls?

Accepted Answer

A) Do not accept the order, as it is not worthwhile pursuing 'a one time only expression of interest.' 
B) Do not accept the offer, as a loss will be incurred. 
C) Do not accept the order, as the variable cost plus the fixed costs per unit amount to $30 per unit. 
D) Accept the offer, as it will lead to a $9 per unit contribution to fixed costs. 
A) Do not accept the order, as it is not worthwhile pursuing 'a one time only expression of interest.' 
B) Do not accept the offer, as a loss will be incurred. 
C) Do not accept the order, as the variable cost plus the fixed costs per unit amount to $30 per unit. 
D) Accept the offer, as it will lead to a $9 per unit contribution to fixed costs.

Question 11

If sales revenue totals $84,000, selling price is $6 per unit, variable costs are $2.50 per unit and fixed costs are $48,000 per annum, the profit that will be earned is:

Accepted Answer

A) $13,714. 
B) $19,200. 
C) $1,000. 
D) $5,600. 
A) $13,714. 
B) $19,200. 
C) $1,000. 
D) $5,600.

Question 12

Relevant costs for decision-making are those costs that:

Accepted Answer

A) vary amongst alternatives. 
B) represent fixed costs only. 
C) are the same for all alternatives. 
D) none of the above. 
A) vary amongst alternatives. 
B) represent fixed costs only. 
C) are the same for all alternatives. 
D) none of the above.

Question 13

Wombat World is a small zoo displaying native animals. The entrance fee is $15 per person. Variable costs of running the zoo are $8 per visitor and fixed costs are $200,000 per annum. The number of visitors that would be needed to make a profit of $20,000 per annum is:

Accepted Answer

A) 1,333. 
B) 31,429. 
C) 14,667. 
D) 27,500. 
A) 1,333. 
B) 31,429. 
C) 14,667. 
D) 27,500.

Question 14

As output increases, variable costs per unit are:

Accepted Answer

A) semi-fixed. 
B) constant. 
C) variable. 
D) proportional to total costs. 
A) semi-fixed. 
B) constant. 
C) variable. 
D) proportional to total costs.

Question 15

How are fixed costs best defined?

Accepted Answer

A) as fixed in relation to changes in activity over the relevant range of output. 
B) as fixed for all time. 
C) as fixed for 6 months. 
D) as fixed for a given number of products. 
A) as fixed in relation to changes in activity over the relevant range of output. 
B) as fixed for all time. 
C) as fixed for 6 months. 
D) as fixed for a given number of products.

Question 16

Use the information below to answer the following questions.
Computers Expertise Ltd provides three services, the details for which are as follows: $\begin{array}{llll}
& \underline{\text { Basic} }& \underline{ \text { Secretarial }} & \underline{ \text { Expert }}\ 
\text { Sales price per unit } & \$ 20 & \$ 30 & \$ 50 \
\text { Variable cost per unit } & \$ 10 & \$ 12 & \$ 15 \
\text { (paper, transport, etc.) } & & & \
\text { Labour time per unit } & 1 \text { hour } & 2 \text { hours } & 5 \text { hours } \
\text { Annual fixed costs } & \$ 20,000 & &
\end{array}$
 The demand for all service is unlimited. The ability to provide the service is limited by the availability of qualified staff and therefore the labour time available.
-Refer to the table above. The demand for Secretarial Service is very strong, however, Computer Expertise does not have sufficient labour hours available to meet the demand. An employment agency is able to supply qualified staff to provide the Secretarial Service. What is the maximum price Computer Expertise should be prepared to pay per hour?

Accepted Answer

A) $9. 
B) $18. 
C) $30. 
D) $12. 
A) $9. 
B) $18. 
C) $30. 
D) $12.

Question 17

A venture is said to be risky when the:

Accepted Answer

A) actual level of activity is less than the planned level of activity. 
B) actual level of activity is greater than the planned level of activity. 
C) planned level of activity is only slightly above the break-even point. 
D) none of the above. 
A) actual level of activity is less than the planned level of activity. 
B) actual level of activity is greater than the planned level of activity. 
C) planned level of activity is only slightly above the break-even point. 
D) none of the above.

Question 18

For short-run decisions, which costs can normally be deemed to be irrelevant?

Accepted Answer

A) Variable costs. 
B) Relevant costs. 
C) Fixed costs. 
D) Total costs. 
A) Variable costs. 
B) Relevant costs. 
C) Fixed costs. 
D) Total costs.

Question 19

Use the information below to answer the following questions.
Sales Extraordinaire sells one particular photo frame. It estimates that it can sell as many frames as it produces. $\begin{array}{lr}
\text { Sales price per unit } & \$ 6.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Fixed costs per annum } & \$ 9,000
\end{array}$
-Refer to the table above. Increasing the sales price to $8.00 and having a sales volume of 3,000 photo frames would result in:

Accepted Answer

A) a profit of $6,000. 
B) a loss of $1,000. 
C) breaking even. 
D) a profit of $1,000. 
A) a profit of $6,000. 
B) a loss of $1,000. 
C) breaking even. 
D) a profit of $1,000.

Question 20

The following information relates to component AHB2 manufactured by Aquarius Electronics. $$\begin{array} { l l r } 
\text { Internal Manufacturing cost: } & \text { Direct materials } & \$ 30 \
\text { (per unit) } & \text { Direct labour } & 18 \
& \text { Variable manufacturing overhead } & 9 \
& \text { Fixed manufacturing overhead } & \underline { 17 } \
&& \underline { 74 } \
& \
\text { External acquisition price (per unit) } & & \$ 54
\end{array}$$ REQUIRED:
a)Based on the financial data presented, should Aquarius continue to manufacture the part or source it from the external supplier?
b)What other factors need to be taken into account?

Accepted Answer

a) 
Therefore, the economic conclusion i

If total costs are $30,000 at an output of 3,000 units and $35,000 at an output of 3,500 units, variable costs per unit are:

On a profit-volume chart, the slope of the graph is equal to:

The organisation more likely to be highly operationally geared is:

High operating gearing refers to:

On a profit-volume chart, the output where the graph line crosses the axis is the output where:

The term 'relevant range,' means the range:

Which of these would be considered a fixed cost?

If sales revenue totals $84,000, selling price is $6 per unit, variable costs are $2.50 per unit and fixed costs are $48,000 per annum, the profit that will be earned is:

Relevant costs for decision-making are those costs that:

Wombat World is a small zoo displaying native animals. The entrance fee is $15 per person. Variable costs of running the zoo are $8 per visitor and fixed costs are $200,000 per annum. The number of visitors that would be needed to make a profit of $20,000 per annum is:

As output increases, variable costs per unit are:

How are fixed costs best defined?

A venture is said to be risky when the:

For short-run decisions, which costs can normally be deemed to be irrelevant?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

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Exam 9: Cost-Volume-Profit Analysis and Relevant Costing

If total costs are $30,000 at an output of 3,000 units and $35,000 at an output of 3,500 units, variable costs per unit are:

On a profit-volume chart, the slope of the graph is equal to:

The organisation more likely to be highly operationally geared is:

High operating gearing refers to:

On a profit-volume chart, the output where the graph line crosses the axis is the output where:

The term 'relevant range,' means the range:

Which of these would be considered a fixed cost?

If sales revenue totals $84,000, selling price is $6 per unit, variable costs are $2.50 per unit and fixed costs are $48,000 per annum, the profit that will be earned is:

Relevant costs for decision-making are those costs that:

Wombat World is a small zoo displaying native animals. The entrance fee is $15 per person. Variable costs of running the zoo are $8 per visitor and fixed costs are $200,000 per annum. The number of visitors that would be needed to make a profit of $20,000 per annum is:

As output increases, variable costs per unit are:

How are fixed costs best defined?

A venture is said to be risky when the:

For short-run decisions, which costs can normally be deemed to be irrelevant?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters