Question 1

What is the margin of safety?

Accepted Answer

A) planned unit sales minus break-even unit sales 
B) actual unit sales minus planned unit sales 
C) sales price minus fixed expenses 
D) equals contribution margin 
A) planned unit sales minus break-even unit sales 
B) actual unit sales minus planned unit sales 
C) sales price minus fixed expenses 
D) equals contribution margin

Question 2

Which of the following costs is a variable cost?

Accepted Answer

A) rental expense for factory building for manufacturer of electronics 
B) lease cost for factory machine for manufacturer of electronics 
C) fuel for airplane for airline 
D) depreciation expense of airplane for airline 
A) rental expense for factory building for manufacturer of electronics 
B) lease cost for factory machine for manufacturer of electronics 
C) fuel for airplane for airline 
D) depreciation expense of airplane for airline

Question 3

A key factor in controlling costs is focusing on the revenues a product or service generates.

Accepted Answer

A) True 
 B)False

Question 4

At the break-even point,net income may be positive.

Accepted Answer

A) True 
 B)False

Question 5

A good example of a cost driver for production labor wages is the number of engineering hours worked.

Accepted Answer

A) True 
 B)False

Question 6

Assume the sales price is $100 per unit and the variable cost is $75 per unit.Total fixed costs are $150,000.Then the break-even volume in dollar sales is ________.

Accepted Answer

A) $1,500 
B) $150,000 
C) $200,000 
D) $600,000 
A) $1,500 
B) $150,000 
C) $200,000 
D) $600,000

Question 7

What happens when the cost-driver activity level decreases within the relevant range?

Accepted Answer

A) total fixed costs increase 
B) fixed costs per unit decrease 
C) total variable costs increase 
D) variable costs per unit are unchanged 
A) total fixed costs increase 
B) fixed costs per unit decrease 
C) total variable costs increase 
D) variable costs per unit are unchanged

Question 8

Hot Company,a producer of salsa,has the following information:   The contribution margin per unit is ________.

Accepted Answer

A) $2.00 
B) $3.00 
C) $5.00 
D) $8.00 
A) $2.00 
B) $3.00 
C) $5.00 
D) $8.00

Question 9

On the CVP graph,the horizontal difference between the sales line and the total expenses line measures the net income or net loss.

Accepted Answer

A) True 
 B)False

Question 10

Assume fixed costs are constant and contribution margin per unit is reduced 50 percent.What will happen to the break-even point in units?

Accepted Answer

A) It will decrease 50 percent. 
B) It will increase 100 percent. 
C) It will be the same. 
D) It will increase 50 percent. 
A) It will decrease 50 percent. 
B) It will increase 100 percent. 
C) It will be the same. 
D) It will increase 50 percent.

Question 11

An assumption of the CVP analysis is that changes in efficiency are expected.

Accepted Answer

A) True 
 B)False

Question 12

The following information for Company Tired is:   What is the gross margin for this company?

Accepted Answer

A) $500,000 
B) $548,000 
C) $578,000 
D) $600,000 
A) $500,000 
B) $548,000 
C) $578,000 
D) $600,000

Question 13

Cost drivers are ________.

Accepted Answer

A) the different functions in the value chain 
B) different types of functional areas in the firm 
C) measures of activities that require the use of resources and thereby cause costs 
D) different types of cost calculations 
A) the different functions in the value chain 
B) different types of functional areas in the firm 
C) measures of activities that require the use of resources and thereby cause costs 
D) different types of cost calculations

Question 14

A good example of a cost driver for production supervisor salaries is the number of people supervised.

Accepted Answer

A) True 
 B)False

Question 15

The vertical axis on the cost-volume-profit graph is the ________.

Accepted Answer

A) dollars of cost 
B) sales volume in units 
C) dollars of revenue 
D) dollars of cost and revenue 
A) dollars of cost 
B) sales volume in units 
C) dollars of revenue 
D) dollars of cost and revenue

Question 16

Generally,companies that spend heavily for advertising are willing to do so because they have low contribution-margin percentages.

Accepted Answer

A) True 
 B)False

Question 17

As sales volume increases in the relevant range,a fixed cost does not change ________,but the fixed cost ________ becomes progressively smaller.

Accepted Answer

A) per-unit; total 
B) in total; per-unit 
C) per-unit; per-unit 
D) in total; per year 
A) per-unit; total 
B) in total; per-unit 
C) per-unit; per-unit 
D) in total; per year

Question 18

The break-even point is located at the intersection of the total revenue line and the total expenses line on a cost-volume-profit graph.

Accepted Answer

A) True 
 B)False

Question 19

Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room hotel.Average daily room rents are $50 per room and average variable costs are $10 for each room rented.It operates 365 days per year.If the hotel is completely full throughout the year,what is net income for one year?

Accepted Answer

A) $(1,188,000) 
B) $3,180,000 
C) $4,275,000 
D) $5,475,000 
A) $(1,188,000) 
B) $3,180,000 
C) $4,275,000 
D) $5,475,000

Question 20

Contribution margin is equal to ________.

Accepted Answer

A) sales minus variable costs 
B) sales minus fixed costs 
C) sales minus variable production costs 
D) sales minus production costs 
A) sales minus variable costs 
B) sales minus fixed costs 
C) sales minus variable production costs 
D) sales minus production costs

What is the margin of safety?

Which of the following costs is a variable cost?

A key factor in controlling costs is focusing on the revenues a product or service generates.

At the break-even point,net income may be positive.

A good example of a cost driver for production labor wages is the number of engineering hours worked.

Assume the sales price is $100 per unit and the variable cost is $75 per unit.Total fixed costs are $150,000.Then the break-even volume in dollar sales is ________.

What happens when the cost-driver activity level decreases within the relevant range?

Hot Company,a producer of salsa,has the following information: The contribution margin per unit is ________.

On the CVP graph,the horizontal difference between the sales line and the total expenses line measures the net income or net loss.

Assume fixed costs are constant and contribution margin per unit is reduced 50 percent.What will happen to the break-even point in units?

An assumption of the CVP analysis is that changes in efficiency are expected.

The following information for Company Tired is: What is the gross margin for this company?

Cost drivers are ________.

A good example of a cost driver for production supervisor salaries is the number of people supervised.

The vertical axis on the cost-volume-profit graph is the ________.

Generally,companies that spend heavily for advertising are willing to do so because they have low contribution-margin percentages.

As sales volume increases in the relevant range,a fixed cost does not change ,but the fixed cost becomes progressively smaller.

The break-even point is located at the intersection of the total revenue line and the total expenses line on a cost-volume-profit graph.

Contribution margin is equal to ________.

Managerial Accounting, the Business Organization

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 2: Introduction to Cost Behavior and Cost-Volume Relationships

What is the margin of safety?

Which of the following costs is a variable cost?

A key factor in controlling costs is focusing on the revenues a product or service generates.

At the break-even point,net income may be positive.

A good example of a cost driver for production labor wages is the number of engineering hours worked.

Assume the sales price is $100 per unit and the variable cost is $75 per unit.Total fixed costs are $150,000.Then the break-even volume in dollar sales is ________.

What happens when the cost-driver activity level decreases within the relevant range?

Hot Company,a producer of salsa,has the following information: The contribution margin per unit is ________.

On the CVP graph,the horizontal difference between the sales line and the total expenses line measures the net income or net loss.

Assume fixed costs are constant and contribution margin per unit is reduced 50 percent.What will happen to the break-even point in units?

An assumption of the CVP analysis is that changes in efficiency are expected.

The following information for Company Tired is: What is the gross margin for this company?

Cost drivers are ________.

A good example of a cost driver for production supervisor salaries is the number of people supervised.

The vertical axis on the cost-volume-profit graph is the ________.

Generally,companies that spend heavily for advertising are willing to do so because they have low contribution-margin percentages.

As sales volume increases in the relevant range,a fixed cost does not change ________,but the fixed cost ________ becomes progressively smaller.

The break-even point is located at the intersection of the total revenue line and the total expenses line on a cost-volume-profit graph.

Contribution margin is equal to ________.

Managerial Accounting, the Business Organization

Measurement of Cost Behavior

Cost Management Systems and Activity-Based Costing

Relevant Information for Decision Making With a Focus

Relevant Information for Decision Making With a Focus

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

As sales volume increases in the relevant range,a fixed cost does not change ,but the fixed cost becomes progressively smaller.