Question 1

The high-low method of estimating the fixed and variable components of a mixed cost is a precise approach that uses a statistical technique.

Accepted Answer

A) True 
 B)False

Question 2

The high-low method differs from the scattergraph in that the high-low method

Accepted Answer

A) is simple to prepare and interpret whereas the scattergraph requires the use of statistical methods. 
B) is less costly than the scattergraph method. 
C) uses a statistical technique to estimate the cost components. 
D) requires only two data points - the lowest point of activity and the highest point of activity. 
A) is simple to prepare and interpret whereas the scattergraph requires the use of statistical methods. 
B) is less costly than the scattergraph method. 
C) uses a statistical technique to estimate the cost components. 
D) requires only two data points - the lowest point of activity and the highest point of activity.

Question 3

The formula for the contribution margin ratio is

Accepted Answer

A) contribution margin divided by sales. 
B) contribution margin divided by net income. 
C) contribution margin divided by gross profit. 
D) contribution margin divided by (sales less variable costs). 
A) contribution margin divided by sales. 
B) contribution margin divided by net income. 
C) contribution margin divided by gross profit. 
D) contribution margin divided by (sales less variable costs).

Question 4

Which of the following is not an example of a fixed cost for manufacturer of bicycles?

Accepted Answer

A) Rent on factory warehouse 
B) Insurance on factory equipment 
C) Number of tires 
D) Advertising costs 
A) Rent on factory warehouse 
B) Insurance on factory equipment 
C) Number of tires 
D) Advertising costs

Question 5

Unlike the contribution margin in dollars, the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

Accepted Answer

A) True 
 B)False

Question 6

Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are

Accepted Answer

A) variable cost, fixed cost, selling cost, and administrative cost. 
B) variable cost, fixed cost, mixed cost, and step cost. 
C) variable cost, fixed cost, period cost, and other cost. 
D) selling cost, administrative cost, cost of goods sold, and depreciation. 
A) variable cost, fixed cost, selling cost, and administrative cost. 
B) variable cost, fixed cost, mixed cost, and step cost. 
C) variable cost, fixed cost, period cost, and other cost. 
D) selling cost, administrative cost, cost of goods sold, and depreciation.

Question 7

Like the high-low method of estimating the fixed and variable components of a mixed cost, regression analysis uses a statistical technique that identifies the line of best fit.

Accepted Answer

A) True 
 B)False

Question 8

A characteristic of a variable cost is that the

Accepted Answer

A) total cost varies in proportion to changes in the level of activity. 
B) cost per unit increases as activity increases. 
C) total cost varies indirectly with the level of activity. 
D) the total cost remains constant, regardless of the level of activity. 
A) total cost varies in proportion to changes in the level of activity. 
B) cost per unit increases as activity increases. 
C) total cost varies indirectly with the level of activity. 
D) the total cost remains constant, regardless of the level of activity.

Question 9

International Imports is a merchandising firm.Last year they reported sales of $674,500 and cost of goods sold of $404,700.The company's total variable selling and administrative expense was $60,705, and fixed selling and administrative expense was $53,960.The total contribution margin for the firm is

Accepted Answer

A) $209,095. 
B) $613,795. 
C) $559,835. 
D) $215,840. 
A) $209,095. 
B) $613,795. 
C) $559,835. 
D) $215,840.

Question 10

The contribution format income statement presents costs by behavior.

Accepted Answer

A) True 
 B)False

Question 11

A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior.Which of the following is not classified as a cost function?

Accepted Answer

A) Product 
B) Sales 
C) Administration 
D) Variable 
A) Product 
B) Sales 
C) Administration 
D) Variable

Question 12

Indicate which of the following costs are classified as mixed or step costs.

Accepted Answer

The answer of Indicate which of the following costs are...

Question 13

A variable cost is one that varies in proportion to a business activity.

Accepted Answer

A) True 
 B)False

Question 14

Jenny's Cutting Station offers a new concept in haircuts; low cost and very quick.Set in a local mall, Jenny's offers 15-minute haircuts for harried shoppers who do not have time for lengthy appointments.To ensure that the clients are in and out quickly, she schedules her 5 employees based on expected client traffic.Each of the employees is paid $1,200 per month, with part of their pay coming from client tips.Jenny pays rent and overhead costs of $2,000 per month on the facility.Because of the quick nature of the service, Jenny doesn't have time to clean combs in between clients, so she uses a new comb for each customer, at a cost of $0.55 each.She also provides shampoo and conditioner for each client at a cost of $0.95 per client.The average price for a haircut is $12.Jenny pays herself $5,000 per month.What is Jenny's contribution margin per haircut?

Accepted Answer

A) $11.45 
B) $10.50 
C) $11.05 
D) $10.20 
A) $11.45 
B) $10.50 
C) $11.05 
D) $10.20

Question 15

There are four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis.
Required:
a.Explain the term cost behavior.
b.List the four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis and give an example of each type of cost classified by behavior.
c.Explain the relationship between level of activity and each of the four types of cost behavior.

Accepted Answer

a.Cost behavior refers to the how total

Question 16

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which one of the following statements is not true?

Accepted Answer

A) The $10 base charge is a fixed cost. 
B) The $0.08 charge per kwh is a variable cost. 
C) The total cost is an example of a step cost. 
D) The total cost is an example of a mixed cost. 
A) The $10 base charge is a fixed cost. 
B) The $0.08 charge per kwh is a variable cost. 
C) The total cost is an example of a step cost. 
D) The total cost is an example of a mixed cost.

Question 17

The formula, Electricity cost = $10 + ($0.08 × kwh used) is the formula for a

Accepted Answer

A) mixed cost. 
B) fixed cost. 
C) step cost. 
D) variable cost. 
A) mixed cost. 
B) fixed cost. 
C) step cost. 
D) variable cost.

Question 18

If an organization wants to make a profit, it must generate more sales revenue than the total costs it incurs.Which of the following is not a correct expression of the profit equation?

Accepted Answer

A) Operating income = Sales revenue - Total variable costs - Total fixed costs 
B) Operating income = Sales revenue - Discretionary costs - Fixed costs 
C) Operating income = [(Sales price per unit - Variable cost per unit) × # units sold] - Fixed cost 
D) Operating income = [Contribution margin per unit × # units sold] - Fixed costs 
A) Operating income = Sales revenue - Total variable costs - Total fixed costs 
B) Operating income = Sales revenue - Discretionary costs - Fixed costs 
C) Operating income = [(Sales price per unit - Variable cost per unit) × # units sold] - Fixed cost 
D) Operating income = [Contribution margin per unit × # units sold] - Fixed costs

Question 19

Three popular methods of identifying variable and fixed components of a cost are the scattergraph method, the high-low method and regression analysis.Compare and contrast these three methods.

Accepted Answer

All three methods are used to estimate t

Question 20

What is a mixed cost? What happens to a mixed cost as the level of activity changes?

Accepted Answer

A mixed cost is a cost that contains bot

The high-low method of estimating the fixed and variable components of a mixed cost is a precise approach that uses a statistical technique.

The high-low method differs from the scattergraph in that the high-low method

The formula for the contribution margin ratio is

Which of the following is not an example of a fixed cost for manufacturer of bicycles?

Unlike the contribution margin in dollars, the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are

Like the high-low method of estimating the fixed and variable components of a mixed cost, regression analysis uses a statistical technique that identifies the line of best fit.

A characteristic of a variable cost is that the

The contribution format income statement presents costs by behavior.

A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior.Which of the following is not classified as a cost function?

Indicate which of the following costs are classified as mixed or step costs.

A variable cost is one that varies in proportion to a business activity.

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which one of the following statements is not true?

The formula, Electricity cost = $10 + ($0.08 × kwh used) is the formula for a

If an organization wants to make a profit, it must generate more sales revenue than the total costs it incurs.Which of the following is not a correct expression of the profit equation?

Three popular methods of identifying variable and fixed components of a cost are the scattergraph method, the high-low method and regression analysis.Compare and contrast these three methods.

What is a mixed cost? What happens to a mixed cost as the level of activity changes?

Accounting As a Tool for Management

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

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Exam 2: Cost Behavior and Cost Estimation

The high-low method of estimating the fixed and variable components of a mixed cost is a precise approach that uses a statistical technique.

The high-low method differs from the scattergraph in that the high-low method

The formula for the contribution margin ratio is

Which of the following is not an example of a fixed cost for manufacturer of bicycles?

Unlike the contribution margin in dollars, the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are

Like the high-low method of estimating the fixed and variable components of a mixed cost, regression analysis uses a statistical technique that identifies the line of best fit.

A characteristic of a variable cost is that the

The contribution format income statement presents costs by behavior.

A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior.Which of the following is not classified as a cost function?

Indicate which of the following costs are classified as mixed or step costs.

A variable cost is one that varies in proportion to a business activity.

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which one of the following statements is not true?

The formula, Electricity cost = $10 + ($0.08 × kwh used) is the formula for a

If an organization wants to make a profit, it must generate more sales revenue than the total costs it incurs.Which of the following is not a correct expression of the profit equation?

Three popular methods of identifying variable and fixed components of a cost are the scattergraph method, the high-low method and regression analysis.Compare and contrast these three methods.

What is a mixed cost? What happens to a mixed cost as the level of activity changes?

Accounting As a Tool for Management

Costvolumeprofit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting in a Manufacturing Setting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity-Based Management

Using Accounting Information to Make Managerial Decisions

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralization and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Filters