Question 1

Costs that remain constant on a per-unit level as the level of activity changes are called:

Accepted Answer

A)   fixed costs.
B)   mixed costs.
C)   opportunity costs.
D)   variable costs. D

Question 2

Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are 10,000 units.How much would operating income change if sales increase by 5,000 units?

Accepted Answer

A)   $50,000 increase
B)   $65,000 decrease
C)   $100,000 increase
D)   $50,000 decrease A

Question 3

Variable costs as a percentage of sales for Protoveo Inc.are 65%, sales are $500,000, and fixed costs are $125,000.How much would operating income change if sales decrease by $10,000?

Accepted Answer

A)   $3,500 increase
B)   $3,500 decrease
C)   $3,250 decrease
D)   $3,500 increase. B

Question 4

For purpose of analysis, mixed costs can generally be separated into their variable and fixed components.

Accepted Answer

A) True 
 B)False

Question 5

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 6

Direct materials cost is an example of a fixed cost of production.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following graphs illustrates the behavior of a total variable cost? ​  ​

Accepted Answer

A)   ​Graph 2
B)   ​Graph 3
C)   ​Graph 4
D)   ​Graph 1

Question 8

Which of the following conditions would cause the break-even point to decrease?

Accepted Answer

A)   Increase in total fixed costs
B)   Decrease in unit selling price
C)   Decrease in unit variable cost
D)   Increase in unit variable cost

Question 9

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit.Such an analysis is called:

Accepted Answer

A)   "what if" or sensitivity analysis.
B)   vary the data analysis.
C)   computer-aided analysis.
D)   data gathering.

Question 10

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed as contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 11

Kennedy Co.sells two products, Arks and Bins.Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins.Related data are: ?? $\begin{array}{cccc} 
& \text { Unit } & \text { Unit } & \text { Unit } \
& \text { Selling Variable } & \text { Contribution } \
\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \
\hline\text { Arks } & \$ 80 & \$ 20 & \$ 60 \
\text { Bins } & 120 & 40 & 80
\end{array}$ ?
What was Kennedy's overall product's unit contribution margin?

Accepted Answer

A)   $67.20
B)   $70.00
C)   $72.00
D)   $100.00

Question 12

Compute the break-even point (in dollars) if fixed costs are $540,000 and variable cost are 70% of sales.

Accepted Answer

A)   $3,850,000
B)   $1,800,000
C)   $1,650,000
D)   $900,000

Question 13

Under direct costing, only _____ manufacturing costs are included in the product cost.

Accepted Answer

A)   variable
B)   fixed
C)   capitalized
D)   notional

Question 14

If a business sells two products, it is not possible to estimate the break-even point.

Accepted Answer

A) True 
 B)False

Question 15

Direct materials and direct labor costs are examples of variable costs of production.

Accepted Answer

A) True 
 B)False

Question 16

If fixed costs are $220,000 and the unit contribution margin is $25, the sales necessary to earn an operating income of $30,000 are 10,000 units.

Accepted Answer

A) True 
 B)False

Question 17

Based on the following information, calculate fixed costs per month using the high-low method. ? $$\begin{array} { l c c } 
& \text { Cost } & \text { Machine Hours } \
\text { May } & \$ 56,000 & 22,000 \
\text { June } & 76,000 & 32,000 \
\text { July } & 58,000 & 26,000 \
\text { August } & 66,000 & 24,000
\end{array}$$

Accepted Answer

A)   $12,000
B)   $11,000
C)   $10,000
D)   $9,000

Question 18

Knowing how costs behave to change in the level of activity is useful to management for all the following reasons except for:

Accepted Answer

A)   predicting customer demand.
B)   predicting profits as sales and production volumes change.
C)   estimating costs.
D)   changing an existing product production.

Question 19

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

Accepted Answer

A)   decrease.
B)   increase.
C)   remain the same.
D)   increase or decrease, depending upon the percentage increase in utility rates.

Question 20

Which of the following is true about the changes in fixed cost?

Accepted Answer

A)   An increase in production will result in an increase in per unit fixed cost.
B)   A decrease in fixed cost will result in an increase in variable cost.
C)   An increase in production will result in a decrease in per unit fixed cost.
D)   A decrease in production will result in an increase in total fixed cost.

Exam 11: Cost-Volume-Profit Analysis

Costs that remain constant on a per-unit level as the level of activity changes are called:

Wiles Inc.'s unit selling price is $40, the unit variable costs is $30, fixed costs are $135,000, and current sales are 10,000 units.How much would operating income change if sales increase by 5,000 units?

Variable costs as a percentage of sales for Protoveo Inc.are 65%, sales are $500,000, and fixed costs are $125,000.How much would operating income change if sales decrease by $10,000?

For purpose of analysis, mixed costs can generally be separated into their variable and fixed components.

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

Direct materials cost is an example of a fixed cost of production.

Which of the following graphs illustrates the behavior of a total variable cost? ​ ​

Which of the following conditions would cause the break-even point to decrease?

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit.Such an analysis is called:

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed as contribution margin ratio.

Compute the break-even point (in dollars) if fixed costs are $540,000 and variable cost are 70% of sales.

Under direct costing, only _____ manufacturing costs are included in the product cost.

If a business sells two products, it is not possible to estimate the break-even point.

Direct materials and direct labor costs are examples of variable costs of production.

If fixed costs are $220,000 and the unit contribution margin is $25, the sales necessary to earn an operating income of $30,000 are 10,000 units.

Knowing how costs behave to change in the level of activity is useful to management for all the following reasons except for:

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

Which of the following is true about the changes in fixed cost?

Which of the following graphs illustrates the behavior of a total variable cost?