Question 1

Which one of the following statements is not true?

Accepted Answer

A)  Total fixed costs remain the same regardless of volume. 
B)  Total variable costs change with volume. 
C)  Total variable costs decrease as the volume increases. 
D)  Fixed costs per unit increase as the volume decreases. 
E)  Variable costs per unit remain the same regardless of the volume. 
A)  Total fixed costs remain the same regardless of volume. 
B)  Total variable costs change with volume. 
C)  Total variable costs decrease as the volume increases. 
D)  Fixed costs per unit increase as the volume decreases. 
E)  Variable costs per unit remain the same regardless of the volume.

Question 2

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product. (Assume that the sales mix is known.)

Accepted Answer

Since the sales mix is known, the contri

Question 3

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

Accepted Answer

A)  6,500 
B)  6,000 
C)  500 
D)  5,000 
E)  5,500 
A)  6,500 
B)  6,000 
C)  500 
D)  5,000 
E)  5,500

Question 4

What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?

Accepted Answer

Operating leverage is the extent or rela

Question 5

Dividing a mixed cost into its separate fixed and variable cost components makes it more difficult to do cost-volume-profit analysis.

Accepted Answer

A) True 
 B)False

Question 6

A special case of cost-volume-profit analysis is:

Accepted Answer

A)  Least-squares analysis. 
B)  Step-wise analysis. 
C)  Composite margin analysis. 
D)  Break-even analysis. 
E)  Cost analysis. 
A)  Least-squares analysis. 
B)  Step-wise analysis. 
C)  Composite margin analysis. 
D)  Break-even analysis. 
E)  Cost analysis.

Question 7

Ginger Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?

Accepted Answer

A)  $5 
B)  $20 
C)  $30 
D)  $40 
E)  $50 
A)  $5 
B)  $20 
C)  $30 
D)  $40 
E)  $50

Question 8

A step-wise variable cost can be separated into a fixed component and a variable component.

Accepted Answer

A) True 
 B)False

Question 9

Curvilinear costs are also known as nonlinear costs.

Accepted Answer

A) True 
 B)False

Question 10

Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?

Accepted Answer

A)  $20,160 
B)  $110,526 
C)  $350,000 
D)  $240,000 
E)  $84,000 
A)  $20,160 
B)  $110,526 
C)  $350,000 
D)  $240,000 
E)  $84,000

Question 11

The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

Accepted Answer

A) True 
 B)False

Question 12

A company has a contribution margin per unit of $8.25 and a contribution margin ratio of 12%. What is the selling price of the product?

Accepted Answer

A)  $68.75 
B)  $9.24 
C)  $9.77 
D)  $60.50 
E)  $129.25 
A)  $68.75 
B)  $9.24 
C)  $9.77 
D)  $60.50 
E)  $129.25

Question 13

Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety in percent?

Accepted Answer

Break-even point in dollars sa

Question 14

When graphing cost-volume-profit data on a CVP chart:

Accepted Answer

A)  Units are plotted on the horizontal axis; costs on the vertical axis. 
B)  Units are plotted on the vertical axis; costs on the horizontal axis. 
C)  Both units and costs are plotted on the horizontal axis. 
D)  Both units and cost are plotted on the vertical axis. 
E)  Data points always represent expected future points. 
A)  Units are plotted on the horizontal axis; costs on the vertical axis. 
B)  Units are plotted on the vertical axis; costs on the horizontal axis. 
C)  Both units and costs are plotted on the horizontal axis. 
D)  Both units and cost are plotted on the vertical axis. 
E)  Data points always represent expected future points.

Question 15

Scatter diagrams plot volume on the vertical axis and cost on the horizontal axis.

Accepted Answer

A) True 
 B)False

Question 16

Variable costs per unit increase proportionately with increases in output activity.

Accepted Answer

A) True 
 B)False

Question 17

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

Accepted Answer

(a) Variable costs per unit = $25.00 - $

Question 18

Willco Inc. manufactures electronic parts. They are analyzing their monthly maintenance costs to determine the best way to budget these costs in the future. They have collected the following data for the last 6 months:
 
-Using the high-low method and the Willco data above, what is the approximate fixed cost component of the monthly maintenance costs?

Accepted Answer

A)  $33,860 
B)  $24,500 
C)  $32,755 
D)  $32,715 
E)  $30,686 
A)  $33,860 
B)  $24,500 
C)  $32,755 
D)  $32,715 
E)  $30,686

Question 19

To determine the slope of the variable cost from a scatter diagram, divide the change in volume by the change in cost.

Accepted Answer

A) True 
 B)False

Question 20

___________________________ is a statistical method of identifying an estimated line of cost behavior.

Accepted Answer

Least-squa

Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

Which one of the following statements is not true?

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product. (Assume that the sales mix is known.)

A product sells for $200 per unit, and its variable costs per unit are $130. The fixed costs are $420,000. If the firm wants to earn $35,000 pretax income, how many units must be sold?

What is operating leverage? How can the degree of operating leverage be used in analyzing changes in sales?

Dividing a mixed cost into its separate fixed and variable cost components makes it more difficult to do cost-volume-profit analysis.

A special case of cost-volume-profit analysis is:

Ginger Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%. What is the selling price of the product?

A step-wise variable cost can be separated into a fixed component and a variable component.

Curvilinear costs are also known as nonlinear costs.

Brown Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Brown's break-even point in sales dollars?

The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

A company has a contribution margin per unit of $8.25 and a contribution margin ratio of 12%. What is the selling price of the product?

Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%. If sales are expected to be $1,500,000, what is the margin of safety in percent?

When graphing cost-volume-profit data on a CVP chart:

Scatter diagrams plot volume on the vertical axis and cost on the horizontal axis.

Variable costs per unit increase proportionately with increases in output activity.

A product has a contribution margin per unit of $17 and sells at $25 per unit. If the break-even point is 82,000 units, calculate (a) the variable costs per unit and (b) the total fixed costs.

To determine the slope of the variable cost from a scatter diagram, divide the change in volume by the change in cost.

___________________________ is a statistical method of identifying an estimated line of cost behavior.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity-Based Costing and Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

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