Question 1

In variable costing,the balance of ending Finished Goods Inventory includes fixed manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 2

The ________ method allows managers to increase operating income through production by producing more products than needed.

Accepted Answer

A) absorption costing 
B) variable costing 
C) direct costing 
D) marginal costing 
A) absorption costing 
B) variable costing 
C) direct costing 
D) marginal costing

Question 3

Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.

Accepted Answer

A) True 
 B)False

Question 4

Birch Company sells two products,X and Y.For the coming year,Birch predicts the sale of 6,000 units of X and 12,000 units of Y.The contribution margins of the two products are $6 and $4,respectively.The weighted-average contribution margin would be $5.00.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is considered a period cost under variable costing but not under absorption costing?

Accepted Answer

A) fixed selling and administrative costs 
B) variable manufacturing costs 
C) fixed manufacturing overhead 
D) variable selling and administrative costs 
A) fixed selling and administrative costs 
B) variable manufacturing costs 
C) fixed manufacturing overhead 
D) variable selling and administrative costs

Question 6

The phone bill for a law firm consists of both fixed and variable costs.Refer to the four month data below and apply the high-low method to answer the question.
 
If the company uses 390 minutes in September,how much will the total bill be? (Round your intermediate calculations to two decimal places. )

Accepted Answer

A) $2,381.70 
B) $2,587.23 
C) $3,033.00 
D) $3,356.70 
A) $2,381.70 
B) $2,587.23 
C) $3,033.00 
D) $3,356.70

Question 7

If the volume of activity doubles in the relevant range,total variable costs will also double.

Accepted Answer

A) True 
 B)False

Question 8

Iversen Company has provided the following information:
 
What are the required sales in units for Iversen to break even?

Accepted Answer

A) 381 units 
B) 1,067 units 
C) 281 units 
D) 593 units 
A) 381 units 
B) 1,067 units 
C) 281 units 
D) 593 units

Question 9

Total fixed costs can change from one relevant range to another.

Accepted Answer

A) True 
 B)False

Question 10

The margin of safety can be used to evaluate a company's plans for the future.

Accepted Answer

A) True 
 B)False

Question 11

When units produced exceeds units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.

Accepted Answer

When units produced exceeds units sold,t

Question 12

Which of the following statements is true of variable costing?

Accepted Answer

A) It considers variable manufacturing overhead as period costs. 
B) It considers fixed manufacturing overhead as product costs. 
C) It considers variable selling and administrative costs as product costs. 
D) It considers fixed selling and administrative costs as period costs. 
A) It considers variable manufacturing overhead as period costs. 
B) It considers fixed manufacturing overhead as product costs. 
C) It considers variable selling and administrative costs as product costs. 
D) It considers fixed selling and administrative costs as period costs.

Question 13

When the total fixed costs decreases,the contribution margin per unit ________.

Accepted Answer

A) increases 
B) decreases 
C) remains the same 
D) decreases proportionately 
A) increases 
B) decreases 
C) remains the same 
D) decreases proportionately

Question 14

Adam was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $900 and the fixed monthly operating costs are as follows:
 
Adam's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.60 went to cover his fixed costs,and that anything past that point was pure profit.
How many guitars does Adam have to sell each month to break even?

Accepted Answer

A) 6 guitars 
B) 5 guitars 
C) 7 guitars 
D) 8 guitars 
A) 6 guitars 
B) 5 guitars 
C) 7 guitars 
D) 8 guitars

Question 15

In the graph below,the area between the lines AC and OB after point 'E' represents ________.

Accepted Answer

A) fixed costs 
B) breakeven point 
C) operating loss 
D) operating income 
A) fixed costs 
B) breakeven point 
C) operating loss 
D) operating income

Question 16

Patel Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 15%,then the total variable costs would ________.

Accepted Answer

A) increase by 15% 
B) remain the same 
C) increase by an amount less than 15% 
D) decrease by 15% 
A) increase by 15% 
B) remain the same 
C) increase by an amount less than 15% 
D) decrease by 15%

Question 17

An increase in selling price per unit decreases the contribution margin per unit.

Accepted Answer

A) True 
 B)False

Question 18

Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.

Accepted Answer

A) True 
 B)False

Question 19

Nimtrans,Inc.reports the following information for August:
 
Calculate the gross profit for August using absorption costing.

Accepted Answer

A) $730,000 
B) $620,000 
C) $630,000 
D) $560,000 
A) $730,000 
B) $620,000 
C) $630,000 
D) $560,000

Question 20

Paulson Company has provided the following information:
 
What is the amount of sales in dollars required for Paulson to break even?

Accepted Answer

A) $4,800 
B) $22,857 
C) $53,333 
D) $16,000 
A) $4,800 
B) $22,857 
C) $53,333 
D) $16,000

Exam 21: Cost-Volume-Profit Analysis

In variable costing,the balance of ending Finished Goods Inventory includes fixed manufacturing overhead.

The ________ method allows managers to increase operating income through production by producing more products than needed.

Sensitivity analysis empowers managers with better information for decision making by analyzing how various business strategies will affect profits earned by the company.

Birch Company sells two products,X and Y.For the coming year,Birch predicts the sale of 6,000 units of X and 12,000 units of Y.The contribution margins of the two products are $6 and $4,respectively.The weighted-average contribution margin would be $5.00.

Which of the following is considered a period cost under variable costing but not under absorption costing?

If the volume of activity doubles in the relevant range,total variable costs will also double.

Iversen Company has provided the following information: What are the required sales in units for Iversen to break even?

Total fixed costs can change from one relevant range to another.

The margin of safety can be used to evaluate a company's plans for the future.

When units produced exceeds units sold,how does operating income differ between variable costing and absorption costing? Explain your answer.

Which of the following statements is true of variable costing?

When the total fixed costs decreases,the contribution margin per unit ________.

In the graph below,the area between the lines AC and OB after point 'E' represents ________.

Patel Company incurs both fixed and variable production costs.Assuming the production is within the relevant range,if volume goes up by 15%,then the total variable costs would ________.

An increase in selling price per unit decreases the contribution margin per unit.

Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.

Nimtrans,Inc.reports the following information for August: Calculate the gross profit for August using absorption costing.

Paulson Company has provided the following information: What is the amount of sales in dollars required for Paulson 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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