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Which of the following statements is correct with respect to fixed costs per unit?
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Which of the following describes variable costs?
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accounting1
| Question | Answer |
|---|---|
| Which of the following statements is correct with respect to fixed costs per unit? | They will increase as production decreases |
| Which of the following describes variable costs? | - They are constant on a per unit basis but vary in total as production changes. |
| Which of the following is a characteristic of a variable cost? | - Variable costs vary in total with production and sales |
| On a CVP graph, the intersection of the sales line and the total cost line is known as the: | breakeven point |
| Which of the following statements is incorrect with respect to total variable costs, within the relevant range? | - They will decrease as production decreases |
| Which of the following is not a fixed cost? | fixed costs |
| Which of the following statements is correct with respect to variable cost per unit, within the relevant range? | They will remain the same as production levels change |
| On a CVP graph, what does the horizontal line intersecting the dollar axis at the level of total cost represent? | Total fixed costs |
| Which of the following is a characteristic of a contribution margin income statement? | - When variable costs are less than sales revenue, there is a positive contribution margin |
| Which of the following costs changes in direct proportion to a change in volume? | total variable cost |
| In a CVP graph, what does the line which begins at the lower left corner represent? | total sales revenue |
| Which of the following is an underlying assumption of the cost-volume-profit graph? | volume is the only cost-driver |
| Which of the following is correct with respect to total fixed costs, within the relevant range? | they will remain the same as production levels change |
| contribution margin | sales revenue minus variable expenses |
| True/False: Sensitivity analysis is a “what if” technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes. | true |
| True/False: The breakeven point represents the minimum number of units a company must sell before it earns a profit. | false |
| True/False: When a company produces more units than it sells, absorption costing income will exceed variable costing income. | true |
| True/False: On a CVP graph, the vertical distance between the total expense line and the total sales revenue line equals the operating income or loss. | true |
| True/False: CVP analysis assumes that the only factor that affects costs is change in volume. | false |
| True/False: If all other fathers are constant, an increase in fixed cost will increase the breakeven point. | true |
| True/False: If a unit sells for $11.40 and has a variable cost of $3.80, its contribution margin per unit is $7.60. | true |
| True/False: Both the income statement approach and the contribution margin approach may be used for CVP analysis. | true |
| True/False: A method used to separate mixed costs into fixed and variable components is called the high-low method. | true |
| True/False: Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars. | true |
| True/False: The margin of safety is $500,000 when actual sales are $1,200,000 and the breakeven point in sales is $700,000. | true |
| True/False: Fixed costs per unit decrease as production levels decrease. | false |
| True/False: On a CVP graph, the increase in the operating income as the sales volume increases is equal to the additional contribution margin that is created by the sale of additional units. | true |
| True/False: The total manufacturing cost per unit increases as total production volume increases. | false |
| True/False: Total variable costs change in response to changes in the volume of production. | true |
| True/False: The absorption costing approach considers fixed manufacturing costs to be product costs. | true |
| True/False: Absorption costing net income can be manipulated by management of inventory levels. | true |
| True/False: The breakeven point on a CVP graph is the point where the sales revenue line intersects the total cost line. | true |
| True/False: The variable cost per unit is assumed to be constant within a particular relevant range of activity. | true |
| True/False: To calculate the weighted-average contribution margin, multiply the sum of the individual product contribution margins by the total number of all units sold. | false |
| True/False: When additional units are sold, the change in operating income is equal to the change in contribution margin. | true |
| True/False: To find the number of units that must be sold to achieve a desired operating income, total fixed expenses plus the desired operating income are divided by the contribution margin ratio. | false |
| True/False: If fixed expenses increase, both the breakeven point and the margin of safety increase. | false |
| True/False: Fixed costs divided by the contribution margin per unit equals the breakeven point in unit sales. | true |
| True/False: The mixed cost per unit is constant throughout the relevant range of activity. | false |
| True/False: If unit sales prices, unit variable costs, and total fixed costs remain the same, but the sales mix changes toward the product with the highest contribution margin ratio, the breakeven point will increase. | false |
| A 15% increase in production will result in: | a 15% increase in total production costs |
| If the sales price per unit decreases and the variable costs remain the same, what will be the effect on the contribution margin ratio? | it will decrease |
| What impact would an increase in fixed costs have on the contribution margin, the margin of safety, and the breakeven point? | no effect, decrease, increase |
| Which of the following properly describes the difference between absorption costing and variable costing? | - Fixed manufacturing costs are treated as product costs under absorption costing and as period costs under variable costing. |
| Which of the following statements is correct if total fixed costs decrease while the sales price per unit and variable costs per unit remain constant? | breakeven point decreases |
| Which of the following would explain why the margin of safety in dollars increased even though total sales dollars did not change? | sales price per unit increased |
| Which of the following statements is correct if the variable cost per unit increases while the sale price per unit and total fixed costs remain constant? | breakeven point increases |
| If production exceeds units sold, which of the following statements is correct? | - A higher operating income will result under an absorption costing income statement. |
| True/False: - The breakeven point decreases and the margin of safety increases when the variable cost per unit increases. | FAlse |
| Which of the following statements is correct if both fixed expenses and sale price increase while variable costs per unit are unchanged? | - The breakeven point could increase, decrease, or remain the same |
| A decrease in inventory will cause which of the following when comparing operating income under absorption and variable costing? | A higher operating income under variable costing |
| Which of the following will decrease the breakeven point assuming no other changes in the cost-volume-profit relationship? | increase in the sales price per unit |
| Which of the following will result in an increase in the breakeven point, a decrease in the margin of safety, and a decrease in the contribution margin per unit? | An increase in the unit cost of direct materials |
| True/False: The mixed cost per unit is constant throughout the relevant range of activity. | False |
| Which of the following changes would normally increase the contribution margin per unit the most? | increase in the sales price per unit |
| The manager of which of the following responsibility centers is responsible primarily for controlling expenses? | cost center |
| What do we call the practice of directing executive attention to important deviations from budgeted amounts? | management by exception |
| Which of the following is prepared as the final step in the preparation of the financial budget? | budgeted statement of cash flow |
| Which of the following managers is usually at the highest level of the organization? | investment center manager |
| Which of the following is a responsibility center whose success is measured not only by its income, but also by relating income to its invested capital? | investment center |
| Hogan’s management has forcasted sales of 50,000 units and an increase in finished goods of 10,000 units for the upcoming year. How many units is Hogan planning to produce next year? | 60,000 |
| Which of the following budgets or financial statements is an operating budget? | sales budget |
| Which of the following statements regarding the budgeting process is correct? | - The budget should be designed from the bottom up, with input from employees at all levels. |
| XYZ Company budgeted $4 million for customer service costs, but actually spent only $3 million. Which of the following statements indicates the best course of action for management to take? | - Management will investigate this $1 million favorable variance to ensure that the cost savings do not reflect skimping on customer service. |
| Which of the following is not considered when preparing the cash budget? | depreciation expense |
| The starting point in the budgeting process is the: | preparation of the sales budget |
| Which of the following is not a responsibility center? | equity center |
| True/False: The production budget must be prepared before any other component of the operating budget. | false |
| True/False: Budgeted cash collections and payments are independent of budgeted revenues and expenses. | false |
| True/False: A goal of the budgeting process is to assist managers with coordinating and implementing the business plan. | true |
| True/False: Responsibility accounting is designed to evaluate the performance of each responsibility center and its manager. | true |
| True/False: Budgets provide benchmarks that help managers evaluate performance. | true |
| True/False: The budgeted cash collections for the current month typically take into consideration collections pertaining to credit sales of prior months. | true |
| True/False: The master budget is the set of budgeted financial statements and supporting schedules for the entire organization. | true |
| True/False: The master budget includes the operating budget, the capital expenditures budget, and the financial budget. | true |
| True/False: The cash budget impacts both the budgeted balance sheet and budgeted statement of cash flows. | true |
| True/False: A goal of the budgeting process is to communicate a consistent set of plans throughout the company. | true |
| True/False: Budgeted finished goods inventory will increase when budgeted sales are greater than budgeted production. | false |
| True/False: Responsibility accounting performance reports compare budgets with actual results for each responsibility center. | true |
| True/False: Management must get employees to accept the budget’s goals in order to effectively use the budget as a benchmark for evaluating performance. | true |
| True/False: Budgeting is a technique which is used to plan for future cash inflows and outflows. | true |
| True/False: Budgeted cash operating expenses include depreciation expense. | false |
| True/False: An investment center is a responsibility center in which a manager is accountable for maximizing only operating income. | false |
| True/False: The starting point of a budget process is to predict operating income for the upcoming period. | false |
| True/False: Budgeted operating expenses for the current year include the expiration of insurance that was paid in a previous period. | true |
| Cost of goods sold = | Beginning inventory + Purchases + Freight In - Ending Inventory |
| Factory overhead = | indirect labor + indirect materials + utilities + supplies + janitorial costs + equipment depreciation |
| Total manufacturing costs = | Beginning inventory + cost of goods manufactured |
| True/False: Management accounting's financial reports are restricted by GAAP. | false |
| Manufacturing overhead would be classfied as | product cost and indirect cost |
| period costs = | operating expenses |
| True/False: Managerial and financial accounting both use the accrual method | True |
| True/False: Manufacturing overhead includes all manufacturing costs such as direct labor and direct materials | False |
| True/False: Manufacturing overhead includes indirect costs such as insurance and depreciation on the factory building | True |
| Cost of goods manufactured includes direct materials, direct labor, and manufacturing overhead | True |
| Management accounting is influenced significantly by the Securities Exchange Commission | false |
| True/False: Management accountants should never disclose confidential information acquired in the course of their work | False |
| True/False: Total manufacturing costs to account for during the year minus the beginning work in process equals cost of goods manufactured | false |
| True/False: An increase in the work in process account during the year means that cost of goods manufactured was greater than the manufacturing costs incurred during the year | False |
| True/False: Period costs, such as direct materials, are expensed during the period they were incurred | false |
| Period costs do not include what? | factory janitorial costs |
| Inventory accounts for a manufacturer include what? | materials, work in process, and finished goods |
| True/False: Both management and financial accounting use the accrual basis to record transactions | true |
| What best defines direct materials? | used to determine total inventoriable product costs |
| A merchandiser's purchases are equivalent to what for a manufacturer? | costs of goods manufactured |
| corporate headquarter's property taxes | are period costs and are expensed as incurred |
Created by:
sbruckner