Question 1

Firms operating at 100% capacity

Accepted Answer

A) are common. 
B) are the exception rather than the rule. 
C) have no fixed costs. 
D) have no variable costs. 
A) are common. 
B) are the exception rather than the rule. 
C) have no fixed costs. 
D) have no variable costs.

Question 2

The activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not true about the graph of a mixed cost?

Accepted Answer

A) It is possible to determine the amount of the fixed cost from the graph. 
B) There is a total cost line on the graph. 
C) The fixed cost portion of the graph is the same amount at all levels of activity. 
D) The variable cost portion of the graph is rectangular in shape. 
A) It is possible to determine the amount of the fixed cost from the graph. 
B) There is a total cost line on the graph. 
C) The fixed cost portion of the graph is the same amount at all levels of activity. 
D) The variable cost portion of the graph is rectangular in shape.

Question 4

The fixed cost element of a mixed cost is the cost of having a service available.

Accepted Answer

A) True 
 B)False

Question 5

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

Accepted Answer

A) True 
 B)False

Question 6

The break-even point is equal to the fixed costs plus net income.

Accepted Answer

A) True 
 B)False

Question 7

A fixed cost is a cost which

Accepted Answer

A) varies in total with changes in the level of activity. 
B) remains constant per unit with changes in the level of activity. 
C) varies inversely in total with changes in the level of activity. 
D) remains constant in total with changes in the level of activity. 
A) varies in total with changes in the level of activity. 
B) remains constant per unit with changes in the level of activity. 
C) varies inversely in total with changes in the level of activity. 
D) remains constant in total with changes in the level of activity.

Question 8

Lansbury Manufacturing produces hair brushes.The selling price is $20 per unit and the variable costs are $8 per brush.Fixed costs per month are $4,800.If Lansbury sells 30 more units beyond breakeven, how much does profit increase as a result?

Accepted Answer

A) $360 
B) $600 
C) $240 
D) $1,200 
A) $360 
B) $600 
C) $240 
D) $1,200

Question 9

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

Accepted Answer

A) True 
 B)False

Question 10

At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000.In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000.Using the high-low method, the estimated fixed cost element of power costs is

Accepted Answer

A) $18,000. 
B) $9,000. 
C) $5,400. 
D) $12,600. 
A) $18,000. 
B) $9,000. 
C) $5,400. 
D) $12,600.

Question 11

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%.What is the unit selling price?

Accepted Answer

A) $200 
B) $300 
C) $48 
D) Cannot be determined. 
A) $200 
B) $300 
C) $48 
D) Cannot be determined.

Question 12

In CVP analysis, the term "cost" includes manufacturing costs, and selling and administrative expenses.

Accepted Answer

A) True 
 B)False

Question 13

Gall Manufacturing sells a product for $50 per unit.The fixed costs are $840,000 and the variable costs are 60% of the selling price.As a result of new automated equipment, it is anticipated that fixed costs will increase by $200,000 and variable costs will be 50% of the selling price.The new break-even point in units is:

Accepted Answer

A) 42,000. 
B) 41,600. 
C) 41,200. 
D) 33,600. 
A) 42,000. 
B) 41,600. 
C) 41,200. 
D) 33,600.

Question 14

An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: $\begin{array}{ll}&\text { Unit Variable Cost }&\text { Unit Fixed Cost }\
a.&\text { Increases } & \text { Decreases } \
b.&\text { Remains constant } & \text { Remains constant } \
c.&\text { Decreases } & \text { Remains constant } \
d.&\text { Remains constant } & \text { Decreases }
\end{array}$

Accepted Answer

The answer of An increase in the level of activity...

Question 15

The activity that causes changes in the behavior of costs is referred to as the activity

Accepted Answer

A) index. 
B) multiplier. 
C) element. 
D) correlation. 
A) index. 
B) multiplier. 
C) element. 
D) correlation.

Question 16

Cost activity indexes might help classify costs as

Accepted Answer

A) temporary. 
B) permanent. 
C) variable. 
D) transient. 
A) temporary. 
B) permanent. 
C) variable. 
D) transient.

Question 17

A company requires $1,700,000 in sales to meet its net income target.Its contribution margin is 30%, and fixed costs are $300,000.What is the target net income?

Accepted Answer

A) $510,000 
B) $390,000 
C) $700,000 
D) $210,000 
A) $510,000 
B) $390,000 
C) $700,000 
D) $210,000

Question 18

A company desires to sell a sufficient quantity of products to earn a profit of $400,000.If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

Accepted Answer

A) 225,000 units 
B) 150,000 units 
C) 120,000 units 
D) 90,000 units 
A) 225,000 units 
B) 150,000 units 
C) 120,000 units 
D) 90,000 units

Question 19

The break-even point cannot be determined by

Accepted Answer

A) computing it from a mathematical equation. 
B) computing it using contribution margin. 
C) reading the prior year's financial statements. 
D) deriving it from a CVP graph. 
A) computing it from a mathematical equation. 
B) computing it using contribution margin. 
C) reading the prior year's financial statements. 
D) deriving it from a CVP graph.

Question 20

The break-even point is where total sales equal total variable costs.

Accepted Answer

A) True 
 B)False

Firms operating at 100% capacity

The activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars.

Which of the following is not true about the graph of a mixed cost?

The fixed cost element of a mixed cost is the cost of having a service available.

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

The break-even point is equal to the fixed costs plus net income.

A fixed cost is a cost which

Lansbury Manufacturing produces hair brushes.The selling price is $20 per unit and the variable costs are $8 per brush.Fixed costs per month are $4,800.If Lansbury sells 30 more units beyond breakeven, how much does profit increase as a result?

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000.In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000.Using the high-low method, the estimated fixed cost element of power costs is

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%.What is the unit selling price?

In CVP analysis, the term "cost" includes manufacturing costs, and selling and administrative expenses.

An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: Unit Variable Cost Unit Fixed Cost a. Increases Decreases b. Remains constant Remains constant c. Decreases Remains constant d. Remains constant Decreases

The activity that causes changes in the behavior of costs is referred to as the activity

Cost activity indexes might help classify costs as

A company requires $1,700,000 in sales to meet its net income target.Its contribution margin is 30%, and fixed costs are $300,000.What is the target net income?

A company desires to sell a sufficient quantity of products to earn a profit of $400,000.If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

The break-even point cannot be determined by

The break-even point is where total sales equal total variable costs.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

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Exam 5: Merchandising Operations and the Multiple-Step Income Statement

Firms operating at 100% capacity

The activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars.

Which of the following is not true about the graph of a mixed cost?

The fixed cost element of a mixed cost is the cost of having a service available.

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

The break-even point is equal to the fixed costs plus net income.

A fixed cost is a cost which

Lansbury Manufacturing produces hair brushes.The selling price is $20 per unit and the variable costs are $8 per brush.Fixed costs per month are $4,800.If Lansbury sells 30 more units beyond breakeven, how much does profit increase as a result?

For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

At the high level of activity in November, 7,000 machine hours were run and power costs were $18,000.In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $9,000.Using the high-low method, the estimated fixed cost element of power costs is

A company has a unit contribution margin of $120 and a contribution margin ratio of 40%.What is the unit selling price?

In CVP analysis, the term "cost" includes manufacturing costs, and selling and administrative expenses.

An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: Unit Variable Cost Unit Fixed Cost a. Increases Decreases b. Remains constant Remains constant c. Decreases Remains constant d. Remains constant Decreases

The activity that causes changes in the behavior of costs is referred to as the activity

Cost activity indexes might help classify costs as

A company requires $1,700,000 in sales to meet its net income target.Its contribution margin is 30%, and fixed costs are $300,000.What is the target net income?

A company desires to sell a sufficient quantity of products to earn a profit of $400,000.If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn net income of $400,000?

The break-even point cannot be determined by

The break-even point is where total sales equal total variable costs.

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters