Question 1

Fixed costs always remain constant.

Accepted Answer

A) True 
 B)False

Question 2

A contribution margin income statement is formatted to emphasize cost behavior rather than organizational functions.

Accepted Answer

A) True 
 B)False

Question 3

Listed below are selected costs of a sports car manufacturer at a production level of 4,000 cars. (a) Identify three variable costs. (b) Support your answer by illustrating the cost behavior pattern per unit and in total as the annual volume of motorcycles produced increases from 4,000 cars to 8,000 cars for one variable cost.

Accepted Answer

a. Sports car tire cost (per tire) ($100

Question 4

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: $\begin{array}{lrrr} 
& \text { Unit Sales Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product A } & \$ 150 & \$ 100 & 8,000 \
\text { Product B } & 100 & 60 & 2,000
\end{array}$ The weighted-average contribution margin is

Accepted Answer

A)  $42. 
B)  $45. 
C)  $48. 
D)  $90. 
A)  $42. 
B)  $45. 
C)  $48. 
D)  $90.

Question 5

If targeted sales are 12,000 units, the sales price per unit is $70, fixed costs are $130,000, and variable costs are $40 per unit, then planned profit must be $230,000.

Accepted Answer

A) True 
 B)False

Question 6

A product line's contribution margin represents its contribution to paying off variable costs and to generating a profit.

Accepted Answer

A) True 
 B)False

Question 7

How many units must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

Accepted Answer

A)  1,000 
B)  1,059 
C)  2,000 
D)  2,250 
A)  1,000 
B)  1,059 
C)  2,000 
D)  2,250

Question 8

The equation that will provide the breakeven point in units (SP = selling price) is

Accepted Answer

A)  BE units = (SP - V
C)  ÷ FC per unit. 
B)  VC per unit + FC = SP per unit $\times$ BE units. 
C)  BE units = FC ÷ CM per unit. 
D)  SP per unit - VC per unit = FC ÷ BE units. 
A)  BE units = (SP - V
C)  ÷ FC per unit. 
B)  VC per unit + FC = SP per unit $\times$ BE units. 
C)  BE units = FC ÷ CM per unit. 
D)  SP per unit - VC per unit = FC ÷ BE units.

Question 9

Martin, Inc., has two products: a pocket metronome (unit sales price, $25; unit variable cost, $15) and a pocket tuner (unit sales price, $14; unit variable cost, $9). The company's sales mix of the pocket metronome to the pocket tuner is 4:1 and fixed costs are $32,850.
a. Determine the weighted-average contribution margin.
b. Calculate the weighted-average breakeven point.
c. Compute the breakeven point for each product.

Accepted Answer

a.
 @#IMG-DLM& b. Weighted-average break

Question 10

Using the high-low method and the information below, compute the monthly variable cost per telephone hour for SKP Corporation. $\begin{array}{|l|c|r|}
\hline \text { Month } & \begin{array}{c}
\text { Telephone } \
\text { Hours Used }
\end{array} & \begin{array}{c}
\text { Telephone } \
\text { Expenses }
\end{array} \
\hline \text { April } & 100 & \$ 4,500 \
\text { May } & 110 & 4,800 \
\text { June } & 150 & 5,400 \
\hline
\end{array}$

Accepted Answer

A)  $18.00 
B)  $36.00 
C)  $34.64 
D)  $45.00 
A)  $18.00 
B)  $36.00 
C)  $34.64 
D)  $45.00

Question 11

The contribution margin equals total fixed costs at the breakeven point.

Accepted Answer

A) True 
 B)False

Question 12

For every unit that a company produces and sells above the breakeven point, its profitability is improved (ignoring taxes) by the unit's

Accepted Answer

A)  gross margin. 
B)  selling price minus fixed cost. 
C)  variable cost. 
D)  contribution margin. 
A)  gross margin. 
B)  selling price minus fixed cost. 
C)  variable cost. 
D)  contribution margin.

Question 13

Within the relevant range, fixed and variable costs behave differently.

Accepted Answer

A) True 
 B)False

Question 14

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: $\begin{array}{rrrr} 
& \text { Unit Sales Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product A } & \$ 150 & \$ 100 & 8,000 \
\text { Product B } & 100 & 60 & 2,000 \
\end{array}$ The weighted-average breakeven point is

Accepted Answer

A)  11,429 units. 
B)  10,000 units. 
C)  5,333 units. 
D)  10,667 units. 
A)  11,429 units. 
B)  10,000 units. 
C)  5,333 units. 
D)  10,667 units.

Question 15

The equation for finding the breakeven point may be written as

Accepted Answer

A)  S VC FC = 0. 
B)  VC FC = S. 
C)  S + FC = VC. 
D)  S + VC + FC = 0. 
A)  S VC FC = 0. 
B)  VC FC = S. 
C)  S + FC = VC. 
D)  S + VC + FC = 0.

Question 16

In terms of cost behavior, telephone expense and direct materials are classified as

Accepted Answer

A)  variable and fixed, respectively. 
B)  fixed and variable, respectively. 
C)  mixed and fixed, respectively. 
D)  mixed and variable, respectively. 
A)  variable and fixed, respectively. 
B)  fixed and variable, respectively. 
C)  mixed and fixed, respectively. 
D)  mixed and variable, respectively.

Question 17

Cost-volume-profit analysis is not appropriate for service businesses.

Accepted Answer

A) True 
 B)False

Question 18

Tigor Enterprises has sales revenue of $340,000 for 20xx. Its product sells for $12 and has a 20 percent contribution margin. Fixed costs are $21,000. What is Tigor Enterprises' operating income for 20xx?

Accepted Answer

A)  $56,000 
B)  $40,000 
C)  $52,000 
D)  $47,000 
A)  $56,000 
B)  $40,000 
C)  $52,000 
D)  $47,000

Question 19

The weighted-average breakeven point is the breakeven point for the entire company.

Accepted Answer

A) True 
 B)False

Question 20

Linear approximation is a method of converting nonlinear variable costs into linear fixed costs.

Accepted Answer

A) True 
 B)False

Exam 23: Cost Behavior Analysis

Fixed costs always remain constant.

A contribution margin income statement is formatted to emphasize cost behavior rather than organizational functions.

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: Unit Sales Price Unit Variable Costs Unit Sales Product A \ 150 \ 100 8,000 Product B 100 60 2,000 The weighted-average contribution margin is

If targeted sales are 12,000 units, the sales price per unit is $70, fixed costs are $130,000, and variable costs are $40 per unit, then planned profit must be $230,000.

A product line's contribution margin represents its contribution to paying off variable costs and to generating a profit.

How many units must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

The equation that will provide the breakeven point in units (SP = selling price) is

Using the high-low method and the information below, compute the monthly variable cost per telephone hour for SKP Corporation. Month Telephone Hours Used Telephone Expenses April 100 \ 4,500 May 110 4,800 June 150 5,400

The contribution margin equals total fixed costs at the breakeven point.

For every unit that a company produces and sells above the breakeven point, its profitability is improved (ignoring taxes) by the unit's

Within the relevant range, fixed and variable costs behave differently.

Lakeside has gathered the following data in order to calculate the weighted-average contribution margin: Unit Sales Price Unit Variable Costs Unit Sales Product A \ 150 \ 100 8,000 Product B 100 60 2,000 The weighted-average breakeven point is

The equation for finding the breakeven point may be written as

In terms of cost behavior, telephone expense and direct materials are classified as

Cost-volume-profit analysis is not appropriate for service businesses.

Tigor Enterprises has sales revenue of $340,000 for 20xx. Its product sells for $12 and has a 20 percent contribution margin. Fixed costs are $21,000. What is Tigor Enterprises' operating income for 20xx?

The weighted-average breakeven point is the breakeven point for the entire company.

Linear approximation is a method of converting nonlinear variable costs into linear fixed costs.

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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