Question 1

Which of the following statements is true of absorption and variable costing methods?

Accepted Answer

A) Both costing methods consider selling and administrative costs to be period costs. 
B) Variable costing considers variable selling and administrative costs to be product costs. 
C) Absorption costing considers fixed manufacturing overhead to be period costs. 
D) Both costing methods consider fixed manufacturing overhead to be product costs. 
A) Both costing methods consider selling and administrative costs to be period costs. 
B) Variable costing considers variable selling and administrative costs to be product costs. 
C) Absorption costing considers fixed manufacturing overhead to be period costs. 
D) Both costing methods consider fixed manufacturing overhead to be product costs.

Question 2

Herrera Company's Model A generator sells for $569 and Model B sells for $499.The variable cost of Model A is $514 and of Model B is $416.If Herrera Company's sales incentives reward sales of the goods with the highest contribution margin,the sales force will be motivated to push sales of Model A more aggressively than Model B.

Accepted Answer

A) True 
 B)False

Question 3

If all other factors remain constant,an increase in fixed costs will increase the breakeven point.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is true of the behavior of 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 5

Grimes Company incurred fixed costs of $310,000.Total costs,both fixed and variable,are $480,000 when 50,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

Accepted Answer

A) $9.60 
B) $4.25 
C) $6.20 
D) $3.40 
A) $9.60 
B) $4.25 
C) $6.20 
D) $3.40

Question 6

During the current year,Albee Company incurred $7,000 of fixed and $16,000 variable costs.If the number of units produced is halved next year,the company will incur $3,500 as fixed and $8,000 as variable costs.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Aspen Manufacturers produces flooring material.The monthly fixed costs are $12,000 per month.The unit selling price is $85 and variable cost per unit is $45.How many units should Aspen sell in order to earn $10,000 as operating income?

Accepted Answer

Required sales in units = (Fix

Question 9

Which of the following statements is true if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?

Accepted Answer

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

Question 10

Johar Company provides the following information about its product:
 
What is the contribution margin ratio?

Accepted Answer

A) 85% 
B) 100% 
C) 118% 
D) 15% 
A) 85% 
B) 100% 
C) 118% 
D) 15%

Question 11

The traditional income statement format calculates operating income as gross profit minus selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 12

Molina Company has provided the following information:
 
Which of the following statements is true,if the sales volume increases by 10%?

Accepted Answer

A) Operating income will increase by $5,800. 
B) Operating income will increase by $27,100. 
C) Fixed expenses will increase by $21,300. 
D) Contribution margin will increase by $77,900. 
A) Operating income will increase by $5,800. 
B) Operating income will increase by $27,100. 
C) Fixed expenses will increase by $21,300. 
D) Contribution margin will increase by $77,900.

Question 13

From the graph given below,identify the sales revenue line.

Accepted Answer

A) OB 
B) AC 
C) AD 
D) AE 
A) OB 
B) AC 
C) AD 
D) AE

Question 14

Mendoza Company's highest point of total cost was $85,000 in June.Their point of lowest cost was $60,000 in January.The company makes a single product.Production volume in June was 14,000 units;production volume in January was 8,000 units.What is the variable cost per unit?

Accepted Answer

A) $10.63 per unit 
B) $2.33 per unit 
C) $4.17 per unit 
D) $6.07 per unit 
A) $10.63 per unit 
B) $2.33 per unit 
C) $4.17 per unit 
D) $6.07 per unit

Question 15

When all the units produced are sold,the operating income calculated under absorption costing is higher when compared to the operating income calculated under variable costing.Assume that there is no beginning Finished Goods Inventory.

Accepted Answer

A) True 
 B)False

Question 16

Under absorption costing,the more units added to ending Finished Goods Inventory,the less fixed manufacturing overhead is '"hidden" in ending Finished Goods Inventory at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is true if total fixed costs decreases 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 18

A 10% increase in production volume will result in a ________.

Accepted Answer

A) 10% increase in the variable cost per unit 
B) 10% increase in total mixed costs 
C) 10% increase in total administration costs 
D) 10% increase in total variable costs 
A) 10% increase in the variable cost per unit 
B) 10% increase in total mixed costs 
C) 10% increase in total administration costs 
D) 10% increase in total variable costs

Question 19

When the variable cost per unit decreases,the contribution margin on each unit sold also decreases.

Accepted Answer

A) True 
 B)False

Question 20

Higher fixed costs decrease the total contribution margin required to break even.

Accepted Answer

A) True 
 B)False

Exam 21: Cost-Volume-Profit Analysis

Which of the following statements is true of absorption and variable costing methods?

If all other factors remain constant,an increase in fixed costs will increase the breakeven point.

Which of the following statements is true of the behavior of total fixed costs,within the relevant range?

Grimes Company incurred fixed costs of $310,000.Total costs,both fixed and variable,are $480,000 when 50,000 units are produced.It sold 40,000 units during the year.Calculate the variable cost per unit.

During the current year,Albee Company incurred $7,000 of fixed and $16,000 variable costs.If the number of units produced is halved next year,the company will incur $3,500 as fixed and $8,000 as variable costs.

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

Aspen Manufacturers produces flooring material.The monthly fixed costs are $12,000 per month.The unit selling price is $85 and variable cost per unit is $45.How many units should Aspen sell in order to earn $10,000 as operating income?

Which of the following statements is true if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant?

Johar Company provides the following information about its product: What is the contribution margin ratio?

The traditional income statement format calculates operating income as gross profit minus selling and administrative expenses.

Molina Company has provided the following information: Which of the following statements is true,if the sales volume increases by 10%?

From the graph given below,identify the sales revenue line.

Mendoza Company's highest point of total cost was $85,000 in June.Their point of lowest cost was $60,000 in January.The company makes a single product.Production volume in June was 14,000 units;production volume in January was 8,000 units.What is the variable cost per unit?

When all the units produced are sold,the operating income calculated under absorption costing is higher when compared to the operating income calculated under variable costing.Assume that there is no beginning Finished Goods Inventory.

Under absorption costing,the more units added to ending Finished Goods Inventory,the less fixed manufacturing overhead is '"hidden" in ending Finished Goods Inventory at the end of the accounting period.

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

A 10% increase in production volume will result in a ________.

When the variable cost per unit decreases,the contribution margin on each unit sold also decreases.

Higher fixed costs decrease the total contribution margin required to break even.

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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