Question 1

Total variable and fixed costs will be the same regardless of how many units are produced.

Accepted Answer

A) True 
 B)False

Question 2

The contribution margin income statement enables managers to view revenue and cost relationships on a per unit basis or as a percentage of sales.

Accepted Answer

A) True 
 B)False

Question 3

The high-low method allows you to differentiate between fixed and variable costs when dealing with mixed costs.

Accepted Answer

A) True 
 B)False

Question 4

The engineering method of separating costs

Accepted Answer

A)  is generally used to estimate the cost of activities and new products. 
B)  is sometimes called a time and motion study. 
C)  is expensive to use because it is so detailed. 
D)  All of the above are correct. 
A)  is generally used to estimate the cost of activities and new products. 
B)  is sometimes called a time and motion study. 
C)  is expensive to use because it is so detailed. 
D)  All of the above are correct.

Question 5

Theoretical capacity refers to

Accepted Answer

A)  extra machinery and equipment kept on hand. 
B)  the maximum productive output possible. 
C)  an output level that allows for normal work stoppages. 
D)  the operating capacity that will meet expected sales demand. 
A)  extra machinery and equipment kept on hand. 
B)  the maximum productive output possible. 
C)  an output level that allows for normal work stoppages. 
D)  the operating capacity that will meet expected sales demand.

Question 6

In a graph of cost-volume-profit analysis, the

Accepted Answer

A)  total revenue line typically begins at a required minimum level. 
B)  slope of the total cost line is dependent on the variable cost per unit. 
C)  total cost line normally begins at zero. 
D)  sales level at which total cost and total revenue lines intersect is also equal to fixed costs. 
A)  total revenue line typically begins at a required minimum level. 
B)  slope of the total cost line is dependent on the variable cost per unit. 
C)  total cost line normally begins at zero. 
D)  sales level at which total cost and total revenue lines intersect is also equal to fixed costs.

Question 7

Margin of safety is the excess of actual sales over break even sales.

Accepted Answer

A) True 
 B)False

Question 8

Projected cost information for a new product to be produced by Kolier Manufacturing is as follows:
   The product is to be sold for $49. 
a. Compute the number of units that must be sold to earn a profit of $80,000.
b. Compute the number of units that must be sold if advertising costs rise by $12,000 and a targeted profit of $120,000 is to be obtained.
c. Use the original information and sales of 10,000 units to compute the new selling price that the company must use to obtain a profit of $200,000.
d. The most in annual sales that could be projected is 20,000 units. Determine the added amount that could be spent on fixed advertising costs if the highest possible selling price that management believes can be charged is $50 and if there is a targeted profit of $225,000.

Accepted Answer

a.
 @#IMG-DLM& b.
 @#IMG-DLM& c. New selling price

Question 9

When managers plan, they may use cost behavior to decide how to change the mix of products to meet changing demand.

Accepted Answer

A) True 
 B)False

Question 10

Cost behavior is defined as the manner in which costs respond to changes in volume or activity.

Accepted Answer

A) True 
 B)False

Question 11

Neverlate is world famous for its precision pocket watches. The company has estimated that variable manufacturing costs and variable selling costs per watch will be $72 and $43, respectively, for 20xx. Also during 20xx, the company is expecting fixed manufacturing costs to total $291,600 and fixed general and administrative expenses to amount to $253,175. The anticipated selling price of each watch is $500. Compute (a) the breakeven point in sales units and (b) the breakeven point in sales dollars.

Accepted Answer

The answer of Neverlate is world famous for its precision...

Question 12

Breakeven sales in dollars can be obtained without knowing the contribution margin per unit.

Accepted Answer

A) True 
 B)False

Question 13

Cost-volume-profit analysis assumes costs and revenues have a close linear approximation.

Accepted Answer

A) True 
 B)False

Question 14

Dapper Hat Makers is in the business of designing and producing specialty hats. The material used for derbies costs $4.50 per unit, and Dapper pays each of its two full-time employees $250 per week. If Employee A makes 15 derbies in one week, what is the variable cost per derby? (Round to two decimal places where necessary.)

Accepted Answer

A)  $4.50 
B)  $15.00 
C)  $16.67 
D)  $21.17 
A)  $4.50 
B)  $15.00 
C)  $16.67 
D)  $21.17

Question 15

Identify the following as fixed costs, variable costs, or mixed costs:
_____________a. Direct materials
_____________b. Electricity
_____________c. Factory building rent
_____________d. Advertising expense
_____________e. Shipping expense
_____________f. Insurance on the factory building
_____________g. Cost of goods sold
_____________h. Direct labor

Accepted Answer

a. Variable
b. Mixed

Question 16

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000, a variable cost per unit of $36, a selling price of $60, and a sales level of $125,000. The targeted level of profit must be

Accepted Answer

A)  $20,000. 
B)  $50,000. 
C)  $95,000. 
D)  $75,000. 
A)  $20,000. 
B)  $50,000. 
C)  $95,000. 
D)  $75,000.

Question 17

When using the high-low method, the accountant assumes the fixed portion of mixed costs to be the lowest fixed amount incurred during the period under review.

Accepted Answer

A) True 
 B)False

Question 18

Explain what cost-volume-profit analysis is and how managers use it. Give examples of some purposes for which it might be used.

Accepted Answer

Cost-volume-profit analysis is an analys

Question 19

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in sales dollars?

Accepted Answer

A)  $205,714 
B)  $110,000 
C)  $144,000 
D)  $173,000 
A)  $205,714 
B)  $110,000 
C)  $144,000 
D)  $173,000

Question 20

Given the following cost and activity observations for Notwen Company's maintenance costs, use the high-low method to calculate Notwen's monthly fixed costs for maintenance. $\begin{array}{|crr|}
\hline & \text { Cost } & \text { Units Produced } \
\text { January } & \$ 130,000 & 25,000 \
\text { February } & 180,500 & 35,000 \
\text { March } & 151,100 & 28,000 \
\hline
\end{array}$

Accepted Answer

A)  $11,250 
B)  $4,550 
C)  $3,750 
D)  $2,650 
A)  $11,250 
B)  $4,550 
C)  $3,750 
D)  $2,650

Exam 23: Cost Behavior Analysis

Total variable and fixed costs will be the same regardless of how many units are produced.

The contribution margin income statement enables managers to view revenue and cost relationships on a per unit basis or as a percentage of sales.

The high-low method allows you to differentiate between fixed and variable costs when dealing with mixed costs.

The engineering method of separating costs

Theoretical capacity refers to

In a graph of cost-volume-profit analysis, the

Margin of safety is the excess of actual sales over break even sales.

When managers plan, they may use cost behavior to decide how to change the mix of products to meet changing demand.

Cost behavior is defined as the manner in which costs respond to changes in volume or activity.

Breakeven sales in dollars can be obtained without knowing the contribution margin per unit.

Cost-volume-profit analysis assumes costs and revenues have a close linear approximation.

Excerpts from a cost-volume-profit analysis indicate fixed costs of $30,000, a variable cost per unit of $36, a selling price of $60, and a sales level of $125,000. The targeted level of profit must be

When using the high-low method, the accountant assumes the fixed portion of mixed costs to be the lowest fixed amount incurred during the period under review.

Explain what cost-volume-profit analysis is and how managers use it. Give examples of some purposes for which it might be used.

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in sales dollars?

Given the following cost and activity observations for Notwen Company's maintenance costs, use the high-low method to calculate Notwen's monthly fixed costs for maintenance. Cost Units Produced January \ 130,000 25,000 February 180,500 35,000 March 151,100 28,000

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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