Question 1

The point where the profit line intersects the horizontal axis on the profit-volume chart represents:

Accepted Answer

A)  the maximum possible operating loss. 
B)  the maximum possible operating income. 
C)  the total fixed costs. 
D)  the break-even point. 
A)  the maximum possible operating loss. 
B)  the maximum possible operating income. 
C)  the total fixed costs. 
D)  the break-even point.

Question 2

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service such as UPS?

Accepted Answer

A)  Number of trucks employed 
B)  Number of miles driven 
C)  Number of trucks in service 
D)  Number of packages delivered 
A)  Number of trucks employed 
B)  Number of miles driven 
C)  Number of trucks in service 
D)  Number of packages delivered

Question 3

Variable costs are costs that remain constant in total with changes in the activity level.

Accepted Answer

A) True 
 B)False

Question 4

The point in operations at which revenues and expenses are exactly equal is called the break-even point.

Accepted Answer

A) True 
 B)False

Question 5

A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.

Accepted Answer

A) True 
 B)False

Question 6

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are:   Use the above given data to solve the following questions:
Refer to the information provided for Kennedy Co. What was Kennedy's overall product's unit contribution margin?

Accepted Answer

A)  $67.20 
B)  $70.00 
C)  $72.00 
D)  $100.00 
A)  $67.20 
B)  $70.00 
C)  $72.00 
D)  $100.00

Question 7

Which of the following best describes the behavior of the variable cost per unit?

Accepted Answer

A)  Decreases with increase in production 
B)  Decreases with decrease in production 
C)  Remains constant with change in production 
D)  Increases with increase in production 
A)  Decreases with increase in production 
B)  Decreases with decrease in production 
C)  Remains constant with change in production 
D)  Increases with increase in production

Question 8

The contribution margin ratio is the same as the variable cost ratio.

Accepted Answer

A) True 
 B)False

Question 9

As production increases, fixed costs per unit would:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  either increase or decrease, depending on the variable costs. 
A)  increase. 
B)  decrease. 
C)  remain the same. 
D)  either increase or decrease, depending on the variable costs.

Question 10

Which of the following costs is a mixed cost?

Accepted Answer

A)  Salary of a factory supervisor 
B)  Electricity costs of $2 per kilowatt-hour 
C)  Rental costs of $5,000 per month plus $0.30 per machine hour of use 
D)  Straight-line depreciation on factory equipment 
A)  Salary of a factory supervisor 
B)  Electricity costs of $2 per kilowatt-hour 
C)  Rental costs of $5,000 per month plus $0.30 per machine hour of use 
D)  Straight-line depreciation on factory equipment

Question 11

Even if a business sells six products, it is possible to estimate the break-even point.

Accepted Answer

A) True 
 B)False

Question 12

As production increases, what should happen to the variable costs per unit?

Accepted Answer

A)  Remain constant 
B)  Increase 
C)  Decrease 
D)  Either increase or decrease, depending on the fixed costs 
A)  Remain constant 
B)  Increase 
C)  Decrease 
D)  Either increase or decrease, depending on the fixed costs

Question 13

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain the same. 
D)  increase or decrease, depending upon the percentage increase in utility rates. 
A)  decrease. 
B)  increase. 
C)  remain the same. 
D)  increase or decrease, depending upon the percentage increase in utility rates.

Question 14

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are:   Use the above given data to solve the following questions:
Refer to the information provided for Kennedy Co. What was Kennedy's sales mix last year?

Accepted Answer

A)  40% Arks, 60% Bins 
B)  43% Arks, 57% Bins 
C)  54% Arks, 46% Bins 
D)  64% Arks, 36% Bins 
A)  40% Arks, 60% Bins 
B)  43% Arks, 57% Bins 
C)  54% Arks, 46% Bins 
D)  64% Arks, 36% Bins

Question 15

Currently, fixed costs are $450,000, the unit selling price is $75, and the unit variable cost is $50. What would be the break-even sales (in units), if the unit selling price is increased by $5?

Accepted Answer

A)  8,182 units 
B)  9,000 units 
C)  15,000 units 
D)  18,000 units 
A)  8,182 units 
B)  9,000 units 
C)  15,000 units 
D)  18,000 units

Question 16

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Accepted Answer

A) True 
 B)False

Question 17

Knowing how costs behave to change in the level of activity is useful to management for all the following reasons except for:

Accepted Answer

A)  predicting customer demand. 
B)  predicting profits as sales and production volumes change. 
C)  estimating costs. 
D)  changing an existing product production. 
A)  predicting customer demand. 
B)  predicting profits as sales and production volumes change. 
C)  estimating costs. 
D)  changing an existing product production.

Question 18

Assume that Crowson Co. sold 8,000 units of Product A and 2,000 units of Product B in the last year. The unit contribution margins for Products A and B are $20 and $45, respectively. Crowson has fixed costs of $350,000. The break-even point in units is:

Accepted Answer

A)  14,000 units. 
B)  25,278 units. 
C)  8,000 units. 
D)  10,769 units. 
A)  14,000 units. 
B)  25,278 units. 
C)  8,000 units. 
D)  10,769 units.

Question 19

Cost-volume-profit analysis can be presented in both graphically and equation form.

Accepted Answer

A) True 
 B)False

Question 20

Fixed costs are costs that vary in total dollar amount as the level of activity changes.

Accepted Answer

A) True 
 B)False

The point where the profit line intersects the horizontal axis on the profit-volume chart represents:

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service such as UPS?

Variable costs are costs that remain constant in total with changes in the activity level.

The point in operations at which revenues and expenses are exactly equal is called the break-even point.

A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.

Which of the following best describes the behavior of the variable cost per unit?

The contribution margin ratio is the same as the variable cost ratio.

As production increases, fixed costs per unit would:

Which of the following costs is a mixed cost?

Even if a business sells six products, it is possible to estimate the break-even point.

As production increases, what should happen to the variable costs per unit?

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are: Use the above given data to solve the following questions: Refer to the information provided for Kennedy Co. What was Kennedy's sales mix last year?

Currently, fixed costs are $450,000, the unit selling price is $75, and the unit variable cost is $50. What would be the break-even sales (in units), if the unit selling price is increased by $5?

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Knowing how costs behave to change in the level of activity is useful to management for all the following reasons except for:

Assume that Crowson Co. sold 8,000 units of Product A and 2,000 units of Product B in the last year. The unit contribution margins for Products A and B are $20 and $45, respectively. Crowson has fixed costs of $350,000. The break-even point in units is:

Cost-volume-profit analysis can be presented in both graphically and equation form.

Fixed costs are costs that vary in total dollar amount as the level of activity changes.

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

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Exam 11: Cost Behavior and Cost-Volume-Profit Analysis

The point where the profit line intersects the horizontal axis on the profit-volume chart represents:

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service such as UPS?

Variable costs are costs that remain constant in total with changes in the activity level.

The point in operations at which revenues and expenses are exactly equal is called the break-even point.

A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.

Which of the following best describes the behavior of the variable cost per unit?

The contribution margin ratio is the same as the variable cost ratio.

As production increases, fixed costs per unit would:

Which of the following costs is a mixed cost?

Even if a business sells six products, it is possible to estimate the break-even point.

As production increases, what should happen to the variable costs per unit?

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are: Use the above given data to solve the following questions: Refer to the information provided for Kennedy Co. What was Kennedy's sales mix last year?

Currently, fixed costs are $450,000, the unit selling price is $75, and the unit variable cost is $50. What would be the break-even sales (in units), if the unit selling price is increased by $5?

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Knowing how costs behave to change in the level of activity is useful to management for all the following reasons except for:

Assume that Crowson Co. sold 8,000 units of Product A and 2,000 units of Product B in the last year. The unit contribution margins for Products A and B are $20 and $45, respectively. Crowson has fixed costs of $350,000. The break-even point in units is:

Cost-volume-profit analysis can be presented in both graphically and equation form.

Fixed costs are costs that vary in total dollar amount as the level of activity changes.

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, Internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Financial Statement Analysis

Accounting Systems for Manufacturing Businesses

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters