Question 1

The high-low method differs from the scattergraph in that the high-low method

Accepted Answer

A) is simple to prepare and interpret whereas the scattergraph requires the use of statistical techniques. 
B) is less costly than the scattergraph method. 
C) uses a statistical technique to estimate the cost components. 
D) requires only two data points - the lowest point of activity and the highest point of activity. 
A) is simple to prepare and interpret whereas the scattergraph requires the use of statistical techniques. 
B) is less costly than the scattergraph method. 
C) uses a statistical technique to estimate the cost components. 
D) requires only two data points - the lowest point of activity and the highest point of activity.

Question 2

Companies should reduce fixed costs whenever possible during times of falling profits.

Accepted Answer

A) True 
 B)False

Question 3

Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are

Accepted Answer

A) variable cost,fixed cost,selling cost,and administrative cost. 
B) variable cost,fixed cost,mixed cost,and step cost. 
C) variable cost,fixed cost,period cost,and other cost. 
D) selling cost,administrative cost,cost of goods sold,and depreciation. 
A) variable cost,fixed cost,selling cost,and administrative cost. 
B) variable cost,fixed cost,mixed cost,and step cost. 
C) variable cost,fixed cost,period cost,and other cost. 
D) selling cost,administrative cost,cost of goods sold,and depreciation.

Question 4

Suppose Kathy Lentz Company sells hand tatted lace for $25 per yard.Her materials cost $4 per yard and labor costs her $10 per yard.She also estimates her fixed cost to be $50 per month.If she sells 2,000 yards of lace during the month,what is her contribution margin ratio?

Accepted Answer

$25 - $4 + $10 = $11

Question 5

Mega Bright Window Cleaners' monthly income statement at several levels of activity is as follows:
   
Required: 
a.Identify each expense as fixed,variable,or mixed.
b.Prepare a contribution margin income statement based on a volume of 5,000 windows.

Accepted Answer

a.COGS - variable Advertising - fixed Sa

Question 6

As the level of activity increases,the total variable cost

Accepted Answer

A) increases proportionally. 
B) changes inversely. 
C) changes conversely. 
D) remains the same. 
A) increases proportionally. 
B) changes inversely. 
C) changes conversely. 
D) remains the same.

Question 7

Jenny's Cutting Station is a new concept in haircuts; low cost and very quick.Set in a local mall,Jenny's offers 15 minute haircuts for harried shoppers who do not have time for lengthy appointments.To ensure that the clients are in and out quickly,she schedules her 5 employees based on expected client traffic.Each of the employees is paid $1,200 per month,with part of their pay coming from client tips.Jenny pays rent and overhead costs of $2,000 per month.Because of the quick nature of the service,Jenny doesn't have time to clean combs in between clients,so she uses a new comb for each customer,at a cost of $.55 each.She also provides shampoo and conditioner for each client at a cost of $.95 per client.The average price for a haircut is $12.Jenny pays herself $5,000 per month.Calculate Jenny's net operating income assuming 1,400 haircuts this month.

Accepted Answer

A) $1,700 
B) $3,800 
C) $6,500 
D) $2,900 
A) $1,700 
B) $3,800 
C) $6,500 
D) $2,900

Question 8

Contribution margin = Sales revenue - Total variable costs.

Accepted Answer

A) True 
 B)False

Question 9

If activity level increases,what happens to the

Accepted Answer

A) It decreases. 
B) It increases. 
C) It remains the same. 
D) It depends on how much the activity level increases. 
A) It decreases. 
B) It increases. 
C) It remains the same. 
D) It depends on how much the activity level increases.

Question 10

Suppose your cell phone company offers a plan under which you can buy time in blocks of 100 minutes.Every 100-minute block costs $15.If you use 101 minutes you will pay $30.This is an example of a

Accepted Answer

A) variable cost 
B) mixed cost. 
C) fixed cost. 
D) step cost. 
A) variable cost 
B) mixed cost. 
C) fixed cost. 
D) step cost.

Question 11

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

Accepted Answer

A) True 
 B)False

Question 12

Assume you are planning a spring break ski trip to Colorado.You are preparing a budget of your costs.You are staying at a lodge that has a special where the lodge charges you $25 for the first 30 ski lift rides and an additional charge of $5 for each ride in excess of 30.You believe you will ride the ski lift 40 times during the week,so you budget $75.The ski lift charge is an example of a

Accepted Answer

A) fixed cost. 
B) variable cost. 
C) mixed cost. 
D) step cost. 
A) fixed cost. 
B) variable cost. 
C) mixed cost. 
D) step cost.

Question 13

Jenny's Cutting Station is a new concept in haircuts; low cost and very quick.Set in a local mall,Jenny's offers 15 minute haircuts for harried shoppers who do not have time for lengthy appointments.To ensure that the clients are in and out quickly,she schedules her 5 employees based on expected client traffic.Each of the employees is paid $1,200 per month,with part of their pay coming from client tips.Jenny pays rent and overhead costs of $2,000 per month.Because of the quick nature of the service,Jenny doesn't have time to clean combs in between clients,so she uses a new comb for each customer,at a cost of $.55 each.She also provides shampoo and conditioner for each client at a cost of $.95 per client.The average price for a haircut is $12.Jenny pays herself $5,000 per month.What are Jenny's fixed costs for the month?

Accepted Answer

A) $9,200. 
B) $13,000 
C) $11,000 
D) $8,000 
A) $9,200. 
B) $13,000 
C) $11,000 
D) $8,000

Question 14

Georgiana operates a nail salon.She is trying to plan her costs for the next month and is uncertain as to how to estimate those costs.Help her estimate next month's costs given the following information she collected,based on number of customers per month.   If Georgiana estimates 1,400 customers next month,what is the estimated cost for nail supplies?

Accepted Answer

A) $4,030 
B) $4,340 
C) $4,650 
D) $3,720 
A) $4,030 
B) $4,340 
C) $4,650 
D) $3,720

Question 15

If an organization wants to make a profit,it must generate more sales revenue than the total costs it incurs.This relation can be expressed using which of the following profit equations?

Accepted Answer

A) Operating income = [Sales price per unit - Fixed cost per unit x # units produced] - Variable cost 
B) Operating income = [Contribution margin per unit x # units sold] - Fixed costs 
C) Operating income = Sales revenue - Total variable costs - Committed costs 
D) Operating income = Sales revenue - Product costs - Discretionary costs 
A) Operating income = [Sales price per unit - Fixed cost per unit x # units produced] - Variable cost 
B) Operating income = [Contribution margin per unit x # units sold] - Fixed costs 
C) Operating income = Sales revenue - Total variable costs - Committed costs 
D) Operating income = Sales revenue - Product costs - Discretionary costs

Question 16

An example of a step cost is the natural gas bill you receive for heating your apartment.

Accepted Answer

A) True 
 B)False

Question 17

The contribution margin is the difference between sales and fixed costs.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not an example of a variable cost for a manufacturer of bicycles?

Accepted Answer

A) Number of tires 
B) Gallons of paint 
C) Wages for factory workers 
D) President of the company's salary 
A) Number of tires 
B) Gallons of paint 
C) Wages for factory workers 
D) President of the company's salary

Question 19

The formula for a contribution format income statement is

Accepted Answer

A) Sales revenue - Step costs = Contribution margin- Fixed costs = Operating income. 
B) Sales revenue - Cost of goods sold - Discretionary costs = Operating income. 
C) Sales revenue - Discretionary costs = Gross profit - Committed costs = Operating income. 
D) Sales revenue - Variable costs = Contribution margin - Fixed costs = Operating income. 
A) Sales revenue - Step costs = Contribution margin- Fixed costs = Operating income. 
B) Sales revenue - Cost of goods sold - Discretionary costs = Operating income. 
C) Sales revenue - Discretionary costs = Gross profit - Committed costs = Operating income. 
D) Sales revenue - Variable costs = Contribution margin - Fixed costs = Operating income.

Question 20

The contribution margin is calculated as

Accepted Answer

A) sales revenue less cost of goods sold. 
B) sales revenue less discretionary costs. 
C) sales revenue less committed costs. 
D) sales revenue less total variable costs. 
A) sales revenue less cost of goods sold. 
B) sales revenue less discretionary costs. 
C) sales revenue less committed costs. 
D) sales revenue less total variable costs.

The high-low method differs from the scattergraph in that the high-low method

Companies should reduce fixed costs whenever possible during times of falling profits.

Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are

Suppose Kathy Lentz Company sells hand tatted lace for $25 per yard.Her materials cost $4 per yard and labor costs her $10 per yard.She also estimates her fixed cost to be $50 per month.If she sells 2,000 yards of lace during the month,what is her contribution margin ratio?

Mega Bright Window Cleaners' monthly income statement at several levels of activity is as follows: Required: a.Identify each expense as fixed,variable,or mixed. b.Prepare a contribution margin income statement based on a volume of 5,000 windows.

As the level of activity increases,the total variable cost

Contribution margin = Sales revenue - Total variable costs.

If activity level increases,what happens to the

Suppose your cell phone company offers a plan under which you can buy time in blocks of 100 minutes.Every 100-minute block costs $15.If you use 101 minutes you will pay $30.This is an example of a

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

If an organization wants to make a profit,it must generate more sales revenue than the total costs it incurs.This relation can be expressed using which of the following profit equations?

An example of a step cost is the natural gas bill you receive for heating your apartment.

The contribution margin is the difference between sales and fixed costs.

Which of the following is not an example of a variable cost for a manufacturer of bicycles?

The formula for a contribution format income statement is

The contribution margin is calculated as

Accounting As a Tool for Management

Cost-Volume-Profit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralizing and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Statement of Cash Flows

Topic Focus: Process Costing

Topic Focus Variable and Absorption Costing

Topic Focus Standard Costing Systems

Topic Focus Customer Profitability

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Exam 2: Cost Behavior and Cost Estimation

The high-low method differs from the scattergraph in that the high-low method

Companies should reduce fixed costs whenever possible during times of falling profits.

Four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis are

Suppose Kathy Lentz Company sells hand tatted lace for $25 per yard.Her materials cost $4 per yard and labor costs her $10 per yard.She also estimates her fixed cost to be $50 per month.If she sells 2,000 yards of lace during the month,what is her contribution margin ratio?

Mega Bright Window Cleaners' monthly income statement at several levels of activity is as follows: Required: a.Identify each expense as fixed,variable,or mixed. b.Prepare a contribution margin income statement based on a volume of 5,000 windows.

As the level of activity increases,the total variable cost

Contribution margin = Sales revenue - Total variable costs.

If activity level increases,what happens to the

Suppose your cell phone company offers a plan under which you can buy time in blocks of 100 minutes.Every 100-minute block costs $15.If you use 101 minutes you will pay $30.This is an example of a

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

If an organization wants to make a profit,it must generate more sales revenue than the total costs it incurs.This relation can be expressed using which of the following profit equations?

An example of a step cost is the natural gas bill you receive for heating your apartment.

The contribution margin is the difference between sales and fixed costs.

Which of the following is not an example of a variable cost for a manufacturer of bicycles?

The formula for a contribution format income statement is

The contribution margin is calculated as

Accounting As a Tool for Management

Cost-Volume-Profit Analysis and Pricing Decisions

Product Costs and Job Order Costing

Planning and Forecasting

Performance Evaluation: Variance Analysis

Activity-Based Costing and Activity Based Management

Using Accounting Information to Make Managerial Decisions

Capital Budgeting

Decentralizing and Performance Evaluation

Performance Evaluation Revisited: a Balanced Approach

Financial Statement Analysis

Statement of Cash Flows

Topic Focus: Process Costing

Topic Focus Variable and Absorption Costing

Topic Focus Standard Costing Systems

Topic Focus Customer Profitability

Filters