Question 1

Which of the following types of costs always change in total in proportion to changes in the level of activity of a firm?

Accepted Answer

A)  Opportunity costs 
B)  Relevant costs 
C)  Fixed costs 
D)  Variable costs 
A)  Opportunity costs 
B)  Relevant costs 
C)  Fixed costs 
D)  Variable costs

Question 2

Refer to the figure below. Which would be the diagram of a mixed cost?

Accepted Answer

A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D   
A)  Graph A 
B)  Graph B 
C)  Graph C 
D)  Graph D

Question 3

Slaby Motors sells two different products. Following are the monthly revenues and costs:
  
Determine the total contribution margin ratio at the current sales mix and the total contribution margin ratio if the sales mix changes to 50% for each product. (Assume that total sales revenue and variable cost rate stay the same.)

Accepted Answer

Determine the total contribution margin

Question 4

A company with a cost-volume-profit structure of $50X = $30X + $20,000 will earn a 20% return on revenues when it sells:

Accepted Answer

A)  1,000 units 
B)  2,000 units 
C)  1,500 units 
D)  3,000 units 
A)  1,000 units 
B)  2,000 units 
C)  1,500 units 
D)  3,000 units

Question 5

Inner Corporation sells space heaters. The contribution margin is $5.40 per heater. If fixed costs are $540,000, what would be the total number of heaters sold at the break-even point?

Accepted Answer

A)  100,000 
B)  150,000 
C)  200,000 
D)  250,000 
A)  100,000 
B)  150,000 
C)  200,000 
D)  250,000

Question 6

The behavior of a cost is usually defined in terms of how that cost varies with respect to:

Accepted Answer

A)  Time 
B)  Profit 
C)  Level of activity 
D)  Sales price 
A)  Time 
B)  Profit 
C)  Level of activity 
D)  Sales price

Question 7

The scattergraph method is a useful tool for:

Accepted Answer

A)  Analyzing abrupt changes in cost behavior 
B)  Separating mixed costs into their variable and fixed components 
C)  Determining the break-even point 
D)  Working outside the relevant range 
A)  Analyzing abrupt changes in cost behavior 
B)  Separating mixed costs into their variable and fixed components 
C)  Determining the break-even point 
D)  Working outside the relevant range

Question 8

If a company has a positive contribution margin, the maximum amount of loss that it can have is equal to its:

Accepted Answer

A)  Fixed costs 
B)  Variable costs 
C)  Fixed and variable costs 
D)  None of these are correct 
A)  Fixed costs 
B)  Variable costs 
C)  Fixed and variable costs 
D)  None of these are correct

Question 9

If a company's total fixed costs decreased by $6,000 and its contribution margin increased by $12,000, net income would:

Accepted Answer

A)  Decrease by $18,000 
B)  Decrease by $ 6,000 
C)  Increase by $ 6,000 
D)  Increase by $18,000 
A)  Decrease by $18,000 
B)  Decrease by $ 6,000 
C)  Increase by $ 6,000 
D)  Increase by $18,000

Question 10

If sales revenue is equal for a manufacturing firm and a service firm, which of these two firms will probably need a higher contribution margin to break even?

Accepted Answer

A)  Manufacturing firm 
B)  Service firm 
C)  There would be no difference 
D)  More information is necessary to answer the question 
A)  Manufacturing firm 
B)  Service firm 
C)  There would be no difference 
D)  More information is necessary to answer the question

Question 11

Which of the following costs would LEAST likely be a fixed cost?

Accepted Answer

A)  Plant depreciation 
B)  Rent 
C)  Utilities expense 
D)  Executives' salaries 
A)  Plant depreciation 
B)  Rent 
C)  Utilities expense 
D)  Executives' salaries

Question 12

Exhibit 21-6 The graph below illustrates various cost behavior patterns in XYZ Company.
 
-Refer to Exhibit 21-6. In the graph above, total costs are represented by:

Accepted Answer

A)  Line A 
B)  Line B 
C)  Area C 
D)  Area D 
A)  Line A 
B)  Line B 
C)  Area C 
D)  Area D

Question 13

Contribution margin is equal to:

Accepted Answer

A)  Revenues - Fixed costs 
B)  Revenues - Variable costs 
C)  Fixed costs + Variable costs 
D)  Fixed costs - Variable costs 
A)  Revenues - Fixed costs 
B)  Revenues - Variable costs 
C)  Fixed costs + Variable costs 
D)  Fixed costs - Variable costs

Question 14

The following information has been compiled by the accounting department at Wallace Enterprises. The manager, Thomas Hicks, wants you to calculate the variable cost rate and total fixed costs from the information given. Mr. Hicks wants you to use the high-low method of analyzing these costs.

Accepted Answer

The answer of The following information has been compiled by...

Question 15

Total contribution margin will increase in a two-product firm if total units sold remain the same and:

Accepted Answer

A)  Fewer products with the highest contribution margin are sold 
B)  More products with the highest contribution margin are sold 
C)  More products with the lowest contribution margin are sold 
D)  Fixed costs decrease 
A)  Fewer products with the highest contribution margin are sold 
B)  More products with the highest contribution margin are sold 
C)  More products with the lowest contribution margin are sold 
D)  Fixed costs decrease

Question 16

Beta Corp. has a 45% contribution margin ratio on all units they sell. The company would like to make a profit of $20,000. Fixed costs are $70,000. What must Beta earn in sales revenue?

Accepted Answer

A)  $136,000 
B)  $163,636 
C)  $200,000 
D)  $225,000 
A)  $136,000 
B)  $163,636 
C)  $200,000 
D)  $225,000

Question 17

A firm's per-unit contribution margin is $30, its fixed costs are $67,500, and its daily production output is 18 units. How many days will it take to break even after it is in operation?

Accepted Answer

A)  100 days 
B)  125 days 
C)  139 days 
D)  155 days 
A)  100 days 
B)  125 days 
C)  139 days 
D)  155 days

Question 18

When all other factors remain constant, which of the following is true?

Accepted Answer

A)  An increase in fixed costs leads to a decrease in units needed to break even 
B)  An increase in variable costs leads to an increase in units needed to break even 
C)  An increase in sales price leads to an increase in units needed to break even 
D)  A decrease in the variable cost rate leads to an increase in the units needed to break even 
A)  An increase in fixed costs leads to a decrease in units needed to break even 
B)  An increase in variable costs leads to an increase in units needed to break even 
C)  An increase in sales price leads to an increase in units needed to break even 
D)  A decrease in the variable cost rate leads to an increase in the units needed to break even

Question 19

Which of the following is true of a firm having a high level of fixed costs?

Accepted Answer

A)  It would have a better chance of making profits than would a company with a low level of fixed costs 
B)  It would be more susceptible to profit fluctuations because of volume changes than would a firm with a low level of fixed costs 
C)  It must also have high mixed costs 
D)  None of these are true 
A)  It would have a better chance of making profits than would a company with a low level of fixed costs 
B)  It would be more susceptible to profit fluctuations because of volume changes than would a firm with a low level of fixed costs 
C)  It must also have high mixed costs 
D)  None of these are true

Question 20

Given the equation $500X = $300X + $200,000, per-unit contribution margin is:

Accepted Answer

A)  $300 
B)  $200 
C)  $200,000 
D)  $500 
A)  $300 
B)  $200 
C)  $200,000 
D)  $500

Exam 21: Cost Behavior and Decisions Using C-V-P Analysis

Which of the following types of costs always change in total in proportion to changes in the level of activity of a firm?

Refer to the figure below. Which would be the diagram of a mixed cost?

A company with a cost-volume-profit structure of $50X = $30X + $20,000 will earn a 20% return on revenues when it sells:

Inner Corporation sells space heaters. The contribution margin is $5.40 per heater. If fixed costs are $540,000, what would be the total number of heaters sold at the break-even point?

The behavior of a cost is usually defined in terms of how that cost varies with respect to:

The scattergraph method is a useful tool for:

If a company has a positive contribution margin, the maximum amount of loss that it can have is equal to its:

If a company's total fixed costs decreased by $6,000 and its contribution margin increased by $12,000, net income would:

If sales revenue is equal for a manufacturing firm and a service firm, which of these two firms will probably need a higher contribution margin to break even?

Which of the following costs would LEAST likely be a fixed cost?

Exhibit 21-6 The graph below illustrates various cost behavior patterns in XYZ Company. -Refer to Exhibit 21-6. In the graph above, total costs are represented by:

Contribution margin is equal to:

The following information has been compiled by the accounting department at Wallace Enterprises. The manager, Thomas Hicks, wants you to calculate the variable cost rate and total fixed costs from the information given. Mr. Hicks wants you to use the high-low method of analyzing these costs.

Total contribution margin will increase in a two-product firm if total units sold remain the same and:

Beta Corp. has a 45% contribution margin ratio on all units they sell. The company would like to make a profit of $20,000. Fixed costs are $70,000. What must Beta earn in sales revenue?

A firm's per-unit contribution margin is $30, its fixed costs are $67,500, and its daily production output is 18 units. How many days will it take to break even after it is in operation?

When all other factors remain constant, which of the following is true?

Which of the following is true of a firm having a high level of fixed costs?

Given the equation $500X = $300X + $200,000, per-unit contribution margin is:

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Analyzing Financial Statements

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

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