Question 1

The high-low method is used to ________.

Accepted Answer

A)  determine the highest price that can be charged for a product 
B)  separate mixed costs into their variable and fixed components 
C)  identify the relevant and irrelevant costs of a business 
D)  determine the sales level at highest capacity 
A)  determine the highest price that can be charged for a product 
B)  separate mixed costs into their variable and fixed components 
C)  identify the relevant and irrelevant costs of a business 
D)  determine the sales level at highest capacity

Question 2

One of the assumptions of cost-volume-profit (CVP)analysis is that there are no changes in the ________.

Accepted Answer

A)  accounts payable 
B)  cash balance 
C)  inventory levels 
D)  account receivables 
A)  accounts payable 
B)  cash balance 
C)  inventory levels 
D)  account receivables

Question 3

The following data has been provided by Jestina,Inc.for the year.
 $$\begin{array} { | l | r | c | } 
\hline \text { Units produced and sold } & 5,500 & \text { units } \
\hline \text { Sales price } & \$ 300 & \text { per unit } \
\hline \text { Direct materials } & \$ 90 & \text { per unit } \
\hline \text { Direct labor } & \$ 50 & \text { per unit } \
\hline \text { Variable manufacturing overhead } & \$ 40 & \text { per unit } \
\hline \text { Fixed manufacturing overhead } & \$ 110,000 & \text { per year } \
\hline \text { Fixed selling and administrative costs } & \$ 150,000 & \text { per year } \
\hline
\end{array}$$ There are no beginning inventories.Prepare an income statement using the contribution margin format.

Accepted Answer

Jestina, Inc.
Income Statement
Year Ende

Question 4

Accurate Accounting provides accounting services at an average price of $110 per hour and incurs variable costs of $60 per hour.Assume average fixed costs are $7,200 a month.(Round your answer to the nearest whole unit.)
1.What is the number of hours that must be billed to reach the breakeven point?
2.If the company desires to make a profit of $3,600,how many hours must be completed?
3.The company thinks it can reduce fixed costs to $6,800,but variable cost will increase to $64 per hour.The price per unit will not change.What is the new breakeven point in hours?

Accepted Answer

1.Breakeven = (Fixed costs + Target prof

Question 5

Which of the following costs change in total in direct proportion to a change in volume?

Accepted Answer

A)  fixed costs 
B)  variable costs 
C)  mixed costs 
D)  period costs 
A)  fixed costs 
B)  variable costs 
C)  mixed costs 
D)  period costs

Question 6

Windspring Spas,Inc.reports the following information for August: $$\begin{array} { | l | r | } 
\hline \text { Sales Revenue } & \$ 780,000 \
\hline \text { Variable Costs } & 150,000 \
\hline \text { Fixed Costs } & 80,000 \
\hline
\end{array}$$ Calculate the contribution margin for August.

Accepted Answer

A)  $70,000 
B)  $630,000 
C)  $550,000 
D)  $700,000 
A)  $70,000 
B)  $630,000 
C)  $550,000 
D)  $700,000

Question 7

Contribution margin is the amount that contributes to covering the fixed costs and then to providing operating income.

Accepted Answer

A) True 
 B)False

Question 8

When the variable cost per unit increases,the total number of units required to break even also increases.

Accepted Answer

A) True 
 B)False

Question 9

A variable costing income statement is used for ________.

Accepted Answer

A)  filing income tax returns 
B)  external reporting purposes 
C)  determining the amount of gross profit 
D)  internal decision-making purposes 
A)  filing income tax returns 
B)  external reporting purposes 
C)  determining the amount of gross profit 
D)  internal decision-making purposes

Question 10

Contribution margin ratio is the ratio of contribution margin to ________.

Accepted Answer

A)  net sales revenue 
B)  cost of goods sold 
C)  total variable costs 
D)  total fixed costs 
A)  net sales revenue 
B)  cost of goods sold 
C)  total variable costs 
D)  total fixed costs

Question 11

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

Accepted Answer

A) True 
 B)False

Question 12

In the variable costing income statement,variable costs are reported separately from fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

Blythe Company has provided the following information: $$\begin{array} { | l | r | } 
\hline \text { Sales price per unit } & \$ 40 \
\hline \text { Variable cost per unit } & 18 \
\hline \text { Fixed costs per month } & \$ 12,800 \
\hline
\end{array}$$ What is the amount of sales in dollars required for Blythe to break even? (Round any percentages to two decimal places and your final answer to the nearest dollar.)

Accepted Answer

A)  $711 
B)  $23,273 
C)  $582 
D)  $12,800 
A)  $711 
B)  $23,273 
C)  $582 
D)  $12,800

Question 14

Which of the following is NOT a product cost under variable costing?

Accepted Answer

A)  Direct materials 
B)  Direct labor 
C)  Variable manufacturing overhead 
D)  Fixed manufacturing overhead 
A)  Direct materials 
B)  Direct labor 
C)  Variable manufacturing overhead 
D)  Fixed manufacturing overhead

Question 15

Becky's Bakery sells three large muffins for every two small ones.A small muffin sells for $3.50 with a variable cost of $2.00.A large muffin sells for $6.00 with a variable cost of $3.00.What is the weighted-average contribution margin? (Round any intermediate calculations and your final answer to the nearest cent.)

Accepted Answer

A)  $4.75 per muffin 
B)  $2.25 per muffin 
C)  $4.50 per muffin 
D)  $2.40 per muffin 
A)  $4.75 per muffin 
B)  $2.25 per muffin 
C)  $4.50 per muffin 
D)  $2.40 per muffin

Question 16

A 15% increase in production volume will result in a ________.

Accepted Answer

A)  15% increase in the variable cost per unit 
B)  15% increase in total mixed costs 
C)  15% increase in total administration costs 
D)  15% increase in total variable costs 
A)  15% increase in the variable cost per unit 
B)  15% increase in total mixed costs 
C)  15% increase in total administration costs 
D)  15% increase in total variable costs

Question 17

Slate was a professional classical guitar player until a motorcycle accident at left him disabled.After long months of therapy,he hired an experienced luthier and started a small shop to make and sell Spanish guitars.The guitars sell for $700 each,and the fixed monthly operating costs are as follows: $$\begin{array} { | l | r | } 
\hline \text { Rent and utilities } & \$ 810 \
\hline \text { Wages and benefits to luthier } & 2520 \
\hline \text { Other expenses } & 480 \
\hline
\end{array}$$ Slate's accountant told him about contribution margin ratios,and Slate understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and anything above that point was profit.
Slate is planning to increase the sales price to $820.What impact will the increase in sales price have on the breakeven point in units? (Round your answer up to the nearest whole guitar.)

Accepted Answer

A)  It will stay the same. 
B)  It will go down from 12 to 8 units. 
C)  It will go up from 8 to 12 units. 
D)  It will go down from 10 to 8 units. 
A)  It will stay the same. 
B)  It will go down from 12 to 8 units. 
C)  It will go up from 8 to 12 units. 
D)  It will go down from 10 to 8 units.

Question 18

CVP is also sometimes referred to as cost-volume-loss analysis because changes in sales
prices also affect profits (or losses).

Accepted Answer

A) True 
 B)False

Question 19

A cellphone service provider charges $5.00 per month and $0.20 per minute per call.If a customer's current bill is $55,how many minutes did the customer use? (Round any intermediate calculations and your final answer to the nearest whole minute.)

Accepted Answer

A)  275 minutes 
B)  300 minutes 
C)  250 minutes 
D)  225 minutes 
A)  275 minutes 
B)  300 minutes 
C)  250 minutes 
D)  225 minutes

Question 20

Kertas,Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is TRUE of the effect of costing systems on the financial results of Kertas?

Accepted Answer

A)  Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. 
B)  Its operating income will be significantly lower if the company uses absorption costing instead of variable costing. 
C)  Its operating income will vary a little if the company uses absorption costing instead of variable costing. 
D)  Its operating income will be negative if the company uses absorption costing instead of variable costing. 
A)  Its operating income will be significantly higher if the company uses absorption costing instead of variable costing. 
B)  Its operating income will be significantly lower if the company uses absorption costing instead of variable costing. 
C)  Its operating income will vary a little if the company uses absorption costing instead of variable costing. 
D)  Its operating income will be negative if the company uses absorption costing instead of variable costing.

Exam 21: Cost-Volume-Profit Analysis

The high-low method is used to ________.

One of the assumptions of cost-volume-profit (CVP)analysis is that there are no changes in the ________.

Which of the following costs change in total in direct proportion to a change in volume?

Windspring Spas,Inc.reports the following information for August: Sales Revenue \ 780,000 Variable Costs 150,000 Fixed Costs 80,000 Calculate the contribution margin for August.

Contribution margin is the amount that contributes to covering the fixed costs and then to providing operating income.

When the variable cost per unit increases,the total number of units required to break even also increases.

A variable costing income statement is used for ________.

Contribution margin ratio is the ratio of contribution margin to ________.

When there are no units in the beginning Finished Goods Inventory and the units produced are more than the units sold,the operating income will be higher under variable costing than absorption costing.

In the variable costing income statement,variable costs are reported separately from fixed costs.

Which of the following is NOT a product cost under variable costing?

A 15% increase in production volume will result in a ________.

CVP is also sometimes referred to as cost-volume-loss analysis because changes in sales prices also affect profits (or losses).

A cellphone service provider charges $5.00 per month and $0.20 per minute per call.If a customer's current bill is $55,how many minutes did the customer use? (Round any intermediate calculations and your final answer to the nearest whole minute.)

Kertas,Inc.produces paper and office supplies and uses the just-in-time inventory system.Currently,the company is using variable costing.Which of the following is TRUE of the effect of costing systems on the financial results of Kertas?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets,natural Resources,and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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