Question 1

Operating income is determined by deducting all fixed costs related to production, selling, and administration from contribution margin.

Accepted Answer

A) True 
 B)False

Question 2

The typical relationship between variable costs and volume may be described best as follows:

Accepted Answer

A)  Costs increase in an erratic, unpredictable fashion with changes in volume. 
B)  Costs stay fairly constant with changes in volume. 
C)  Costs increase with changes in volume up to a certain point and then remain constant. 
D)  Costs increase in direct proportion to increases in volume. 
A)  Costs increase in an erratic, unpredictable fashion with changes in volume. 
B)  Costs stay fairly constant with changes in volume. 
C)  Costs increase with changes in volume up to a certain point and then remain constant. 
D)  Costs increase in direct proportion to increases in volume.

Question 3

Any cost can be classified as either a variable cost or a fixed cost.

Accepted Answer

A) True 
 B)False

Question 4

Total costs that change in direct proportion to changes in productive output, or any other volume measure, are called variable costs.

Accepted Answer

A) True 
 B)False

Question 5

If a company wants to know how many units of a certain product it must sell to make a desired level of profit, it should add the amount of profit to the numerator in the breakeven analysis.

Accepted Answer

A) True 
 B)False

Question 6

Contribution margin equals sales minus

Accepted Answer

A)  cost of goods sold. 
B)  total costs. 
C)  fixed costs. 
D)  variable costs. 
A)  cost of goods sold. 
B)  total costs. 
C)  fixed costs. 
D)  variable costs.

Question 7

The graphical approach to cost-volume-profit analysis generally yields more precise results than using a formula.

Accepted Answer

A) True 
 B)False

Question 8

Straight-line depreciation on the controller's computer is an example of a variable cost.

Accepted Answer

A) True 
 B)False

Question 9

Contribution Margin Income Statement is prepared to present for external users of financial information.

Accepted Answer

A) True 
 B)False

Question 10

The objective of breakeven analysis is to find the level of activity at which sales revenue equals the sum of all variable and fixed costs.

Accepted Answer

A) True 
 B)False

Question 11

A retail manager is preparing a budget for the coming year and is considering the various costs of the retail store. What is the best approach for the manager to take when budgeting for the cost of the store's merchandise?

Accepted Answer

A)  The total costs will stay the same as last year, but the unit cost will change with each sale. 
B)  The total cost of merchandise for the year and the unit cost will remain constant with each sale. 
C)  The total cost of merchandise for the year will depend on the amount of sales, but the unit cost of each sale will stay fairly constant. 
D)  The total costs will stay the same as last year, and the unit cost will remain constant with each sale. 
A)  The total costs will stay the same as last year, but the unit cost will change with each sale. 
B)  The total cost of merchandise for the year and the unit cost will remain constant with each sale. 
C)  The total cost of merchandise for the year will depend on the amount of sales, but the unit cost of each sale will stay fairly constant. 
D)  The total costs will stay the same as last year, and the unit cost will remain constant with each sale.

Question 12

Plunda Co. is planning production for the coming year. The information to be used is based on a projection of cost information for the current year. Projections of the following costs are as follows:
   Plunda Co. sells its product for $90.00 per unit. Compute the following, showing your calculations: 
a. The breakeven point in sales units
b. The breakeven point in sales dollars
c. The sales level in both sales units and dollars if a profit of $122,400 is projected

Accepted Answer

a.
 @#IMG-DLM& 
b. $

Question 13

The point at which the total cost line intersects with the total revenue line provides information on the number of units that must be sold to break even.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would not require the use of cost behavior analysis?

Accepted Answer

A)  Transferring production costs from one department to another 
B)  Projecting anticipated costs of a new project 
C)  Buying an existing business 
D)  Changing an existing product or service 
A)  Transferring production costs from one department to another 
B)  Projecting anticipated costs of a new project 
C)  Buying an existing business 
D)  Changing an existing product or service

Question 15

Breakeven analysis adjusted for a profit factor

Accepted Answer

A)  is a difficult computation that is not normally employed. 
B)  will not necessarily increase the number of required units. 
C)  is often adapted for different sales levels to aid in determining the possible levels of potential profit. 
D)  is a poor basis for evaluating the profitability of a venture. 
A)  is a difficult computation that is not normally employed. 
B)  will not necessarily increase the number of required units. 
C)  is often adapted for different sales levels to aid in determining the possible levels of potential profit. 
D)  is a poor basis for evaluating the profitability of a venture.

Question 16

Contribution margin is selling price minus unit fixed costs.

Accepted Answer

A) True 
 B)False

Question 17

Using the high-low method and the information below, compute the monthly total fixed costs for SKP Corporation. $\begin{array}{|l|c|r|}
\hline \text { Month } & \begin{array}{c}
\text { Telephone } \
\text { Hours Used }
\end{array} & \begin{array}{c}
\text { Telephone } \
\text { Expenses }
\end{array} \
\hline \text { April } & 100 & \$ 4,500 \
\text { May } & 110 & 4,800 \
\text { June } & 150 & 5,400 \
\hline
\end{array}$

Accepted Answer

A)  $1,800 
B)  $2,700 
C)  $3,640 
D)  $4,500 
A)  $1,800 
B)  $2,700 
C)  $3,640 
D)  $4,500

Question 18

Which of the following is not an assumption underlying cost-volume-profit analysis?

Accepted Answer

A)  Product sales mix will not change during the period. 
B)  The breakeven point will be reached and surpassed during the period. 
C)  Cost behavior can be determined accurately. 
D)  Productivity is constant within the relevant range. 
A)  Product sales mix will not change during the period. 
B)  The breakeven point will be reached and surpassed during the period. 
C)  Cost behavior can be determined accurately. 
D)  Productivity is constant within the relevant range.

Question 19

An insurance company pays its employees a commission of 6 percent on each sale. What is the proper classification of the cost of sales commissions?

Accepted Answer

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

Question 20

Which of the following is a fixed cost?

Accepted Answer

A)  Direct materials 
B)  Personnel manager's salary 
C)  Operating supplies 
D)  Direct labor 
A)  Direct materials 
B)  Personnel manager's salary 
C)  Operating supplies 
D)  Direct labor

Exam 23: Cost Behavior Analysis

Operating income is determined by deducting all fixed costs related to production, selling, and administration from contribution margin.

The typical relationship between variable costs and volume may be described best as follows:

Any cost can be classified as either a variable cost or a fixed cost.

Total costs that change in direct proportion to changes in productive output, or any other volume measure, are called variable costs.

If a company wants to know how many units of a certain product it must sell to make a desired level of profit, it should add the amount of profit to the numerator in the breakeven analysis.

Contribution margin equals sales minus

The graphical approach to cost-volume-profit analysis generally yields more precise results than using a formula.

Straight-line depreciation on the controller's computer is an example of a variable cost.

Contribution Margin Income Statement is prepared to present for external users of financial information.

The objective of breakeven analysis is to find the level of activity at which sales revenue equals the sum of all variable and fixed costs.

A retail manager is preparing a budget for the coming year and is considering the various costs of the retail store. What is the best approach for the manager to take when budgeting for the cost of the store's merchandise?

The point at which the total cost line intersects with the total revenue line provides information on the number of units that must be sold to break even.

Which of the following would not require the use of cost behavior analysis?

Breakeven analysis adjusted for a profit factor

Contribution margin is selling price minus unit fixed costs.

Using the high-low method and the information below, compute the monthly total fixed costs for SKP Corporation. Month Telephone Hours Used Telephone Expenses April 100 \ 4,500 May 110 4,800 June 150 5,400

Which of the following is not an assumption underlying cost-volume-profit analysis?

An insurance company pays its employees a commission of 6 percent on each sale. What is the proper classification of the cost of sales commissions?

Which of the following is a fixed cost?

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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