Question 1

The manager of Kenton Company stated that 45% of its total costs were fixed.The manager was describing the company's:

Accepted Answer

A)  operating leverage. 
B)  contribution margin. 
C)  cost structure. 
D)  cost averaging. 
A)  operating leverage. 
B)  contribution margin. 
C)  cost structure. 
D)  cost averaging.

Question 2

Carson Corporation's sales increase from $500,000 to $600,000 in the current year.What is the percentage change in sales?

Accepted Answer

A)  20% 
B)  25% 
C)  22% 
D)  16.7% 
A)  20% 
B)  25% 
C)  22% 
D)  16.7%

Question 3

The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000.If sales increase by 5%,what is net income expected to be?

Accepted Answer

A)  $25,200 
B)  $26,160 
C)  $24,667 
D)  $43,200 
A)  $25,200 
B)  $26,160 
C)  $24,667 
D)  $43,200

Question 4

An advantage of using the scattergraph method over the high-low method is that all points of data are used in determining the cost line.

Accepted Answer

A) True 
 B)False

Question 5

The following income statement was produced when volume of sales was at 400 units. $$\begin{array} { | l | l r | } 
\hline \text { Sales Revenue } & \$ & 2,000 \
\text { Variable Cost } & & 1,200 \
 \text { Contribution Margin } & \$ & 800 \
\text { Fixed Cost } & & 300 \
\text { Net Income } & \$ & 500 \
\hline
\end{array}$$ If volume reaches 500 units,net income will be:

Accepted Answer

A)  $625 
B)  $1,800 
C)  $700 
D)  None of the above 
A)  $625 
B)  $1,800 
C)  $700 
D)  None of the above

Question 6

Potential problems associated with cost averaging can be reduced by averaging the cost over a shorter span of time.

Accepted Answer

A) True 
 B)False

Question 7

Why would a company need to estimate the fixed and variable components of a mixed cost?

Accepted Answer

Answers will vary
Mixed costs (semivaria

Question 8

The activity director for City Recreation is planning an activity.She is considering alternative ways to set up the activity's cost s

Accepted Answer

A)  If the director expects a low turnout,she should use a fixed cost structure. 
B)  If the director expects a large turnout,she should attempt to convert variable costs into fixed costs. 
C)  If the director shifts the cost structure from fixed to variable,the level of risk decreases. 
D)  If the director shifts the cost structure from fixed to variable,the potential for profits will be reduced. 
A)  If the director expects a low turnout,she should use a fixed cost structure. 
B)  If the director expects a large turnout,she should attempt to convert variable costs into fixed costs. 
C)  If the director shifts the cost structure from fixed to variable,the level of risk decreases. 
D)  If the director shifts the cost structure from fixed to variable,the potential for profits will be reduced.

Question 9

If the company's volume doubles,the total cost per unit will:

Accepted Answer

A)  stay the same. 
B)  decrease. 
C)  double as well. 
D)  increase but will not double. 
A)  stay the same. 
B)  decrease. 
C)  double as well. 
D)  increase but will not double.

Question 10

Contribution margin can only be determined if costs are separated into product and period costs.

Accepted Answer

A) True 
 B)False

Question 11

What is meant by the phrase,"cost s

Accepted Answer

Answers will vary
"Cost structure" refer

Question 12

How does total fixed cost behave when volume increases?

Accepted Answer

Answers will vary
To

Question 13

If a company had a pure variable cost s

Accepted Answer

Answers will vary
Contribution margin an

Question 14

Taste of the Town,Inc.operates a gourmet sandwich shop.The company orders bread,cold cuts,and produce several times a week.If the cost of these items remains constant per customer served,the cost is said to be:

Accepted Answer

A)  Variable 
B)  Fixed 
C)  Opportunity 
D)  Mixed 
A)  Variable 
B)  Fixed 
C)  Opportunity 
D)  Mixed

Question 15

Select the incorrect statement regarding the contribution margin income statement.

Accepted Answer

A)  The contribution margin approach for the income statement is unacceptable for external reporting. 
B)  Contribution margin represents the amount available to cover product costs and thereafter to provide profit. 
C)  The contribution margin approach requires that all costs be classified as fixed or variable. 
D)  Assuming no change in fixed costs,a $1 increase in contribution margin will result in a $1 increase in profit. 
A)  The contribution margin approach for the income statement is unacceptable for external reporting. 
B)  Contribution margin represents the amount available to cover product costs and thereafter to provide profit. 
C)  The contribution margin approach requires that all costs be classified as fixed or variable. 
D)  Assuming no change in fixed costs,a $1 increase in contribution margin will result in a $1 increase in profit.

Question 16

If a company had a pure fixed cost s

Accepted Answer

Answers will vary
With a fixed

Question 17

Mug Shots operates a chain of coffee shops.The company pays rent of $15,000 per year for each shop.Supplies (napkins,bags and condiments)are purchased as needed.The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis.The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost,respectively?

Accepted Answer

A)  Variable cost and fixed cost 
B)  Fixed cost and fixed cost 
C)  Fixed cost and variable cost 
D)  Variable cost and variable cost 
A)  Variable cost and fixed cost 
B)  Fixed cost and fixed cost 
C)  Fixed cost and variable cost 
D)  Variable cost and variable cost

Question 18

If managers of a company do not understand the behavior of its costs,they are likely to make poor decisions about the company's operations.

Accepted Answer

A) True 
 B)False

Question 19

Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

Accepted Answer

A) True 
 B)False

Question 20

Southern Food Service operates six restaurants in the Atlanta area.The company pays rent of $20,000 per year for each shop.The managers of each shop are paid a salary of $4,200 per month and all other employees are paid on an hourly basis.Relative to the number of hours worked,total compensation cost for a particular shop is which kind of cost?

Accepted Answer

A)  Mixed cost 
B)  Fixed cost 
C)  Variable cost 
D)  None of these 
A)  Mixed cost 
B)  Fixed cost 
C)  Variable cost 
D)  None of these

The manager of Kenton Company stated that 45% of its total costs were fixed.The manager was describing the company's:

Carson Corporation's sales increase from $500,000 to $600,000 in the current year.What is the percentage change in sales?

The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000.If sales increase by 5%,what is net income expected to be?

An advantage of using the scattergraph method over the high-low method is that all points of data are used in determining the cost line.

The following income statement was produced when volume of sales was at 400 units. Sales Revenue \ 2,000 Variable Cost 1,200 Contribution Margin \ 800 Fixed Cost 300 Net Income \ 500 If volume reaches 500 units,net income will be:

Potential problems associated with cost averaging can be reduced by averaging the cost over a shorter span of time.

Why would a company need to estimate the fixed and variable components of a mixed cost?

The activity director for City Recreation is planning an activity.She is considering alternative ways to set up the activity's cost s

If the company's volume doubles,the total cost per unit will:

Contribution margin can only be determined if costs are separated into product and period costs.

What is meant by the phrase,"cost s

How does total fixed cost behave when volume increases?

If a company had a pure variable cost s

Taste of the Town,Inc.operates a gourmet sandwich shop.The company orders bread,cold cuts,and produce several times a week.If the cost of these items remains constant per customer served,the cost is said to be:

Select the incorrect statement regarding the contribution margin income statement.

If a company had a pure fixed cost s

If managers of a company do not understand the behavior of its costs,they are likely to make poor decisions about the company's operations.

Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

Management Accounting and Corporate Governance

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 2: Cost Behavior, Operating Leverage, and Profitability Analysis

The manager of Kenton Company stated that 45% of its total costs were fixed.The manager was describing the company's:

Carson Corporation's sales increase from $500,000 to $600,000 in the current year.What is the percentage change in sales?

The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000.If sales increase by 5%,what is net income expected to be?

An advantage of using the scattergraph method over the high-low method is that all points of data are used in determining the cost line.

The following income statement was produced when volume of sales was at 400 units. Sales Revenue \ 2,000 Variable Cost 1,200 Contribution Margin \ 800 Fixed Cost 300 Net Income \ 500 If volume reaches 500 units,net income will be:

Potential problems associated with cost averaging can be reduced by averaging the cost over a shorter span of time.

Why would a company need to estimate the fixed and variable components of a mixed cost?

The activity director for City Recreation is planning an activity.She is considering alternative ways to set up the activity's cost s

If the company's volume doubles,the total cost per unit will:

Contribution margin can only be determined if costs are separated into product and period costs.

What is meant by the phrase,"cost s

How does total fixed cost behave when volume increases?

If a company had a pure variable cost s

Taste of the Town,Inc.operates a gourmet sandwich shop.The company orders bread,cold cuts,and produce several times a week.If the cost of these items remains constant per customer served,the cost is said to be:

Select the incorrect statement regarding the contribution margin income statement.

If a company had a pure fixed cost s

If managers of a company do not understand the behavior of its costs,they are likely to make poor decisions about the company's operations.

Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

Management Accounting and Corporate Governance

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters