Question 1

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

Accepted Answer

A) Rent on factory warehouse 
B) Insurance on factory equipment 
C) Number of tires 
D) Advertising costs 
A) Rent on factory warehouse 
B) Insurance on factory equipment 
C) Number of tires 
D) Advertising costs

Question 2

Dana owns her own real estate agency.She has been working hard to increase her client base.She offers the most comprehensive advertising campaign in the city and it has been paying off by the steady increase in the number of listings over the last several months.However,Dana is concerned that her extensive cost for advertising is eating into her profits.It is difficult to determine how much she spends on advertising for each listing because some of her advertising sources are fixed amounts each month and others are more variable in nature.She would like to analyze the following information to determine how her advertising costs behave based on the number of listings.   Using the high-low method,what is Dana's variable cost per listing for advertising?

Accepted Answer

A) $610 
B) $593 
C) $612 
D) $598 
A) $610 
B) $593 
C) $612 
D) $598

Question 3

An example of a committed fixed cost for a clothing manufacturer is

Accepted Answer

A) an annual contract for television advertising cost. 
B) a 10-year lease on an office building. 
C) yards of fabric used. 
D) thread used. 
A) an annual contract for television advertising cost. 
B) a 10-year lease on an office building. 
C) yards of fabric used. 
D) thread used.

Question 4

When production and sales are equal,a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

Accepted Answer

A) True 
 B)False

Question 5

Step costs are fixed over only a small range of activity.Once that level of activity has been exceeded,total cost

Accepted Answer

A) increases because the excess costs become variable. 
B) increases and remains constant over another small range of activity. 
C) remains the same regardless of activity. 
D) decreases and remains constant over another small range of activity. 
A) increases because the excess costs become variable. 
B) increases and remains constant over another small range of activity. 
C) remains the same regardless of activity. 
D) decreases and remains constant over another small range of activity.

Question 6

Which of the following is not a method of estimating costs?

Accepted Answer

A) Break-even analysis 
B) Bar charts 
C) Financial analysis 
D) The high low method 
A) Break-even analysis 
B) Bar charts 
C) Financial analysis 
D) The high low method

Question 7

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

Question 8

If activity level increases,what happens to the

Accepted Answer

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

Question 9

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.The cost is an example of a

Accepted Answer

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

Question 10

On a scattergraph,you must "fit" a line to the plotted points.Once the line is drawn,

Accepted Answer

A) calculate the fixed and variable costs using basic algebra. 
B) you must use a statistical technique to identify the fixed and variable costs. 
C) you must choose more than one point to calculate the fixed and variable costs. 
D) use regression analysis to calculate the fixed and variable components of the total cost. 
A) calculate the fixed and variable costs using basic algebra. 
B) you must use a statistical technique to identify the fixed and variable costs. 
C) you must choose more than one point to calculate the fixed and variable costs. 
D) use regression analysis to calculate the fixed and variable components of the total cost.

Question 11

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Accepted Answer

A) True 
 B)False

Question 12

Dana owns her own real estate agency.She has been working hard to increase her client base.She offers the most comprehensive advertising campaign in the city and it has been paying off by the steady increase in the number of listings over the last several months.However,Dana is concerned that her extensive cost for advertising is eating into her profits.It is difficult to determine how much she spends on advertising for each listing because some of her advertising sources are fixed amounts each month and others are more variable in nature.She would like to analyze the following information to determine how her advertising costs behave based on the number of listings.   Using the high-low method,what is the fixed cost of advertising each month?

Accepted Answer

A) $2,360 
B) $2,074 
C) $2,900 
D) $1,860 
A) $2,360 
B) $2,074 
C) $2,900 
D) $1,860

Question 13

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which of the following statement is not true?

Accepted Answer

A) The $10 base charge is a fixed cost. 
B) The $0.08 charge per kwh is a variable cost. 
C) The total cost is an example of a step cost. 
D) The total cost is an example of a mixed cost. 
A) The $10 base charge is a fixed cost. 
B) The $0.08 charge per kwh is a variable cost. 
C) The total cost is an example of a step cost. 
D) The total cost is an example of a mixed cost.

Question 14

Discretionary fixed costs are fixed costs that cannot be changed over the short run.

Accepted Answer

A) True 
 B)False

Question 15

Mounce's Market operates with a 20% contribution margin.If Mounce's sales decrease by $10,000,operating income will decrease by

Accepted Answer

A) $200. 
B) $250. 
C) $2,000. 
D) $2,500. 
A) $200. 
B) $250. 
C) $2,000. 
D) $2,500.

Question 16

Step costs are fixed over only a small range of activity.

Accepted Answer

A) True 
 B)False

Question 17

If selling price is $100 per

Accepted Answer

A) 14% 
B) 30% 
C) 200% 
D) 50% 
A) 14% 
B) 30% 
C) 200% 
D) 50%

Question 18

There are four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis.
Required:
a.Explain the term cost behavior.
b.List the four common cost behavior patterns that serve as the foundation for cost-volume-profit analysis and give an example of each type of cost classified by behavior.
c.Explain the relationship between level of activity and each of the four types of cost behavior.

Accepted Answer

a.Cost behavior refers to the way in whi

Question 19

Unlike the contribution margin in dollars,the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

Accepted Answer

A) True 
 B)False

Question 20

There is an important relation between contribution margin and profit.Which of the following statements is not true?

Accepted Answer

A) As the number of units sold increases,total contribution margin increases,but fixed costs remain the same. 
B) As the number of units sold rises,profit increases by the additional contribution margin per unit. 
C) As the number of units sold increases,total contribution margin and fixed costs increase. 
D) As the number of 
A) As the number of units sold increases,total contribution margin increases,but fixed costs remain the same. 
B) As the number of units sold rises,profit increases by the additional contribution margin per unit. 
C) As the number of units sold increases,total contribution margin and fixed costs increase. 
D) As the number of

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

An example of a committed fixed cost for a clothing manufacturer is

When production and sales are equal,a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

Step costs are fixed over only a small range of activity.Once that level of activity has been exceeded,total cost

Which of the following is not a method of estimating costs?

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?

If activity level increases,what happens to the

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.The cost is an example of a

On a scattergraph,you must "fit" a line to the plotted points.Once the line is drawn,

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which of the following statement is not true?

Discretionary fixed costs are fixed costs that cannot be changed over the short run.

Mounce's Market operates with a 20% contribution margin.If Mounce's sales decrease by $10,000,operating income will decrease by

Step costs are fixed over only a small range of activity.

If selling price is $100 per

Unlike the contribution margin in dollars,the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

There is an important relation between contribution margin and profit.Which of the following statements is not true?

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

Exam 2: Cost Behavior and Cost Estimation

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

An example of a committed fixed cost for a clothing manufacturer is

When production and sales are equal,a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

Step costs are fixed over only a small range of activity.Once that level of activity has been exceeded,total cost

Which of the following is not a method of estimating costs?

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?

If activity level increases,what happens to the

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.The cost is an example of a

On a scattergraph,you must "fit" a line to the plotted points.Once the line is drawn,

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Suppose you are charged a $10 per month base charge for your electrical service.You are also charged an additional $0.08 for every kwh of electricity you use.Which of the following statement is not true?

Discretionary fixed costs are fixed costs that cannot be changed over the short run.

Mounce's Market operates with a 20% contribution margin.If Mounce's sales decrease by $10,000,operating income will decrease by

Step costs are fixed over only a small range of activity.

If selling price is $100 per

Unlike the contribution margin in dollars,the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

There is an important relation between contribution margin and profit.Which of the following statements is not true?

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