Question 1

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 2

The results below represent what form of cost behavior?

Accepted Answer

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

Question 3

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold. For Rock Creek Bottling Company, the production manager's salary is an example of:

Accepted Answer

A)  a variable cost. 
B)  a mixed cost. 
C)  a fixed cost. 
D)  none of these 
A)  a variable cost. 
B)  a mixed cost. 
C)  a fixed cost. 
D)  none of these

Question 4

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 5

The following income statements are provided for two companies operating in the same industry:   Assuming sales increase by $1,000, select the correct statement from the following:

Accepted Answer

A)  Felix's net income will be more than Jinx's. 
B)  Only Felix will experience an increase in profit. 
C)  Felix's net income will increase by $250. 
D)  Jinx's net income will increase by 6%. 
A)  Felix's net income will be more than Jinx's. 
B)  Only Felix will experience an increase in profit. 
C)  Felix's net income will increase by $250. 
D)  Jinx's net income will increase by 6%.

Question 6

Pickard Company pays its sales staff a base salary of $4,500 a month plus a $3.00 commission for each product sold. If a salesperson sells 800 units of product in January, the employee would be paid:

Accepted Answer

A)  $6,900 
B)  $4,500 
C)  $2,300 
D)  $2,700 
A)  $6,900 
B)  $4,500 
C)  $2,300 
D)  $2,700

Question 7

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?

Accepted Answer

A)  3,667 units 
B)  3,333 units 
C)  13,500 units 
D)  9,000 units 
A)  3,667 units 
B)  3,333 units 
C)  13,500 units 
D)  9,000 units

Question 8

Larry's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:

Accepted Answer

A)  varies inversely with the number of hours the lawn equipment is operated. 
B)  is not affected by the number of hours the lawn equipment is operated. 
C)  increases in direct proportion to the number of hours the lawn equipment is operated. 
D)  none of the above. 
A)  varies inversely with the number of hours the lawn equipment is operated. 
B)  is not affected by the number of hours the lawn equipment is operated. 
C)  increases in direct proportion to the number of hours the lawn equipment is operated. 
D)  none of the above.

Question 9

Contribution margin cannot be calculated for a service-type business, and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Accepted Answer

A) True 
 B)False

Question 10

Select the incorrect statement regarding the relevant range of volume.

Accepted Answer

A)  Total fixed costs are expected to remain constant. 
B)  Total variable costs are expected to vary in direct proportion with changes in volume. 
C)  Variable cost per unit is expected to remain constant. 
D)  Total cost per unit is expected to remain constant. 
A)  Total fixed costs are expected to remain constant. 
B)  Total variable costs are expected to vary in direct proportion with changes in volume. 
C)  Variable cost per unit is expected to remain constant. 
D)  Total cost per unit is expected to remain constant.

Question 11

Whether a cost behaves as a fixed cost or as a variable cost depends upon the:

Accepted Answer

A)  activity based used. 
B)  cost structure of the company. 
C)  industry 
D)  significance of the dollar amount of the cost. 
A)  activity based used. 
B)  cost structure of the company. 
C)  industry 
D)  significance of the dollar amount of the cost.

Question 12

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
-Cost Structure

Accepted Answer

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

Question 13

Which of the following statements regarding Company A is incorrect?

Accepted Answer

A)  If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units. 
B)  If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit. 
C)  If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold. 
D)  Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect. 
A)  If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units. 
B)  If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit. 
C)  If Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, once it has covered its fixed costs, net income will increase by $30 for each additional unit sold. 
D)  Both if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its break-even point in units is 36,000 units and if Company A has fixed costs of $720,000, a selling price of $50 per unit, and contribution margin of $30 per unit, its variable expenses must be $20 per unit are incorrect.

Question 14

The contribution margin format income statement is not widely used for external financial reporting, but is allowed by GAAP.

Accepted Answer

A) True 
 B)False

Question 15

When computing the break-even point in units, a company should round to the next whole unit because partial units ordinarily are not sold.

Accepted Answer

A) True 
 B)False

Question 16

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 increases to 5,000 units, the total cost per unit will be:

Accepted Answer

A)  $18.00. 
B)  $20.00. 
C)  $20.50. 
D)  $22.50. 
A)  $18.00. 
B)  $20.00. 
C)  $20.50. 
D)  $22.50.

Question 17

Contribution margin represents the amount available to cover fixed expenses and then provide company profits.

Accepted Answer

A) True 
 B)False

Question 18

Risk refers to the possibility that sacrifices may exceed benefits.

Accepted Answer

A) True 
 B)False

Question 19

Cool Runnings operates a chain of frozen yogurt shops. The company pays $5,000 of rent expense per month for each shop. The managers of each shop are paid a salary of $3,000 per month and all other employees are paid on an hourly basis. Relative to the number of shops, the cost of rent is which kind of cost?

Accepted Answer

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

Question 20

Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of:

Accepted Answer

A)  $280,000 
B)  $200,000 
C)  $240,000 
D)  $90,000 
A)  $280,000 
B)  $200,000 
C)  $240,000 
D)  $90,000

Select the incorrect statement regarding the contribution margin income statement.

The results below represent what form of cost behavior?

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold. For Rock Creek Bottling Company, the production manager's salary is an example of:

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

The following income statements are provided for two companies operating in the same industry: Assuming sales increase by $1,000, select the correct statement from the following:

Pickard Company pays its sales staff a base salary of $4,500 a month plus a $3.00 commission for each product sold. If a salesperson sells 800 units of product in January, the employee would be paid:

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?

Larry's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:

Contribution margin cannot be calculated for a service-type business, and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Select the incorrect statement regarding the relevant range of volume.

Whether a cost behaves as a fixed cost or as a variable cost depends upon the:

Which of the following statements regarding Company A is incorrect?

The contribution margin format income statement is not widely used for external financial reporting, but is allowed by GAAP.

When computing the break-even point in units, a company should round to the next whole unit because partial units ordinarily are not sold.

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 increases to 5,000 units, the total cost per unit will be:

Contribution margin represents the amount available to cover fixed expenses and then provide company profits.

Risk refers to the possibility that sacrifices may exceed benefits.

Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of:

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

Select the incorrect statement regarding the contribution margin income statement.

The results below represent what form of cost behavior?

Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold. For Rock Creek Bottling Company, the production manager's salary is an example of:

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

The following income statements are provided for two companies operating in the same industry: Assuming sales increase by $1,000, select the correct statement from the following:

Pickard Company pays its sales staff a base salary of $4,500 a month plus a $3.00 commission for each product sold. If a salesperson sells 800 units of product in January, the employee would be paid:

A product has a contribution margin of $2.50 per unit and a selling price of $25 per unit. Fixed costs are $20,000. Assuming new technology increases the unit contribution margin by 50 percent but increases total fixed costs by $13,750, what is the new breakeven point in units?

Larry's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:

Contribution margin cannot be calculated for a service-type business, and cost-volume-profit analysis is not applicable for a company that provides services rather than selling goods.

Select the incorrect statement regarding the relevant range of volume.

Whether a cost behaves as a fixed cost or as a variable cost depends upon the:

Which of the following statements regarding Company A is incorrect?

The contribution margin format income statement is not widely used for external financial reporting, but is allowed by GAAP.

When computing the break-even point in units, a company should round to the next whole unit because partial units ordinarily are not sold.

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 increases to 5,000 units, the total cost per unit will be:

Contribution margin represents the amount available to cover fixed expenses and then provide company profits.

Risk refers to the possibility that sacrifices may exceed benefits.

Martin Company currently produces and sells 40,000 units of product at a selling price of $12. The product has variable costs of $6 per unit and fixed costs of $150,000. The company currently earns a total contribution margin of:

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