Question 1

If a profitable company has both fixed and variable costs, its operating leverage will always be greater than 1.

Accepted Answer

A) True 
 B)False  True

Question 2

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. 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. B

Question 3

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

Accepted Answer

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

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Select the term from the list provided that best matches each of the following descriptions.
A) A condition in which a percentage change in revenue will produce a proportionately larger percentage change in net income
B) A cost that changes in total in direct proportion to changes in volume
C) A factor that causes (or drives) changes in costs
D) Costs composed of both fixed and variable components
E) The difference between a company's sales revenue and its variable costs
F) The way a cost changes relative to change in a measure of activity
G) A cost that remains constant in total when volume changes
H) A company's cost mix or relative proportion of variable and fixed costs to total costs
-Operating leverage

Accepted Answer

The answer of Select the term from the list provided...

Question 6

Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?

Accepted Answer

A)  (a) = $3.00; (b) = $3.00 
B)  (a) = $5.00; (b) = $4.00 
C)  (a) = $2.50; (b) = $2.00 
D)  (a) = $5.00; (b) = $2.00 
A)  (a) = $3.00; (b) = $3.00 
B)  (a) = $5.00; (b) = $4.00 
C)  (a) = $2.50; (b) = $2.00 
D)  (a) = $5.00; (b) = $2.00

Question 7

Which of the following costs typically include both fixed and variable components?

Accepted Answer

A)  Direct materials 
B)  Direct labor 
C)  Factory overhead 
D)  None of these 
A)  Direct materials 
B)  Direct labor 
C)  Factory overhead 
D)  None of these

Question 8

The variable cost per unit increases in direct proportion to the activity base.

Accepted Answer

A) True 
 B)False

Question 9

The excess of revenue over variable costs is referred to as:

Accepted Answer

A)  gross profit 
B)  gross margin 
C)  contribution margin 
D)  manufacturing margin 
A)  gross profit 
B)  gross margin 
C)  contribution margin 
D)  manufacturing margin

Question 10

M and M, Inc. produces a product that has a variable cost of $3.00 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What is the amount of sales that will be necessary to earn the desired profit?

Accepted Answer

A)  $75,000 
B)  $50,000 
C)  $83,333 
D)  $125,000 
A)  $75,000 
B)  $50,000 
C)  $83,333 
D)  $125,000

Question 11

Mark Company, Inc. sells electronics. The company generated sales of $45,000. Contribution margin is $20,000 and net income is $4,000. Based on this information, the magnitude of operating leverage is:

Accepted Answer

A)  2.25 
B)  11.25 
C)  5.00 
D)  6.25 
A)  2.25 
B)  11.25 
C)  5.00 
D)  6.25

Question 12

The following information is provided for Southall Company:   What is this company's contribution margin?

Accepted Answer

A)  $30,000 
B)  $17,500 
C)  $45,000 
D)  $67,500 
A)  $30,000 
B)  $17,500 
C)  $45,000 
D)  $67,500

Question 13

Select the correct statement regarding fixed costs.

Accepted Answer

A)  There is a contradiction between the term "fixed cost per unit" and the behavior pattern implied by the term. 
B)  Fixed cost per unit is not fixed. 
C)  Total fixed cost remains constant when volume changes. 
D)  All of these are correct statements. 
A)  There is a contradiction between the term "fixed cost per unit" and the behavior pattern implied by the term. 
B)  Fixed cost per unit is not fixed. 
C)  Total fixed cost remains constant when volume changes. 
D)  All of these are correct statements.

Question 14

Consider the following information:   Based on the above information, select the correct statement.

Accepted Answer

A)  Cost of goods sold is a mixed cost. 
B)  Salary cost is a mixed cost. 
C)  Depreciation cost is a variable cost. 
D)  If the company sells 20 units for $540 each, it will incur a loss of $200. 
A)  Cost of goods sold is a mixed cost. 
B)  Salary cost is a mixed cost. 
C)  Depreciation cost is a variable cost. 
D)  If the company sells 20 units for $540 each, it will incur a loss of $200.

Question 15

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units. What is the margin of safety as expressed as a percentage?

Accepted Answer

A)  9.00% 
B)  10.0% 
C)  9.09% 
D)  None of these answers is correct. 
A)  9.00% 
B)  10.0% 
C)  9.09% 
D)  None of these answers is correct.

Question 16

The total variable cost increases in direct proportion to volume.

Accepted Answer

A) True 
 B)False

Question 17

The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?

Accepted Answer

A)  $2,160 
B)  $7,560 
C)  $3,420 
D)  $1,260 
A)  $2,160 
B)  $7,560 
C)  $3,420 
D)  $1,260

Question 18

As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.

Accepted Answer

A) True 
 B)False

Question 19

Variable costs will become fixed outside the relevant range.

Accepted Answer

A) True 
 B)False

Question 20

Within the relevant range, the fixed cost per unit can be expected to decrease with increases in volume.

Accepted Answer

A) True 
 B)False

If a profitable company has both fixed and variable costs, its operating leverage will always be greater than 1.

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles, the total cost per unit will:

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

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

Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?

Which of the following costs typically include both fixed and variable components?

The variable cost per unit increases in direct proportion to the activity base.

The excess of revenue over variable costs is referred to as:

M and M, Inc. produces a product that has a variable cost of $3.00 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What is the amount of sales that will be necessary to earn the desired profit?

Mark Company, Inc. sells electronics. The company generated sales of $45,000. Contribution margin is $20,000 and net income is $4,000. Based on this information, the magnitude of operating leverage is:

The following information is provided for Southall Company: What is this company's contribution margin?

Select the correct statement regarding fixed costs.

Consider the following information: Based on the above information, select the correct statement.

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units. What is the margin of safety as expressed as a percentage?

The total variable cost increases in direct proportion to volume.

The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?

As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.

Variable costs will become fixed outside the relevant range.

Within the relevant range, the fixed cost per unit can be expected to decrease with increases in volume.

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 11: Cost Behavior, Operating Leverage, and Profitability Analysis

If a profitable company has both fixed and variable costs, its operating leverage will always be greater than 1.

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles, the total cost per unit will:

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

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

Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?

Which of the following costs typically include both fixed and variable components?

The variable cost per unit increases in direct proportion to the activity base.

The excess of revenue over variable costs is referred to as:

M and M, Inc. produces a product that has a variable cost of $3.00 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What is the amount of sales that will be necessary to earn the desired profit?

Mark Company, Inc. sells electronics. The company generated sales of $45,000. Contribution margin is $20,000 and net income is $4,000. Based on this information, the magnitude of operating leverage is:

The following information is provided for Southall Company: What is this company's contribution margin?

Select the correct statement regarding fixed costs.

Consider the following information: Based on the above information, select the correct statement.

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units. What is the margin of safety as expressed as a percentage?

The total variable cost increases in direct proportion to volume.

The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?

As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.

Variable costs will become fixed outside the relevant range.

Within the relevant range, the fixed cost per unit can be expected to decrease with increases in volume.

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters