Question 1

The contribution margin ratio is

Accepted Answer

A)  the contribution margin stated as a percentage of sales.
B)  the contribution margin stated as a percentage of profit.
C)  the contribution margin stated as a percentage of total costs.
D)  the contribution margin stated as a percentage of fixed costs.E) A) and B)
F) C) and D)

Question 2

Fremont,which uses the high-low method,reported total costs of $10 per unit at its lowest production level,5,000 units.When production tripled to its highest level,the total cost per unit dropped to $5.Fremont would estimate its variable cost per unit as

Accepted Answer

A)  $2.50.
B)  $5.00.
C)  $15.00.
D)  negative $0.0005.E) A) and D)
F) All of the above

Question 3

Carson,which uses the high-low method of estimating costs,reported total costs of $24 per unit when production was at its lowest level,at 10,000 units.When production doubled to its highest level,the total cost per unit dropped to $15.Carson would estimate its total fixed cost as

Accepted Answer

A)  $9.
B)  $33.
C)  $180,000.
D)  $585,000.E) A) and C)
F) All of the above

Question 4

A step cost

Accepted Answer

A)  is a fixed cost over the relevant range and a variable cost everywhere else.
B)  contains both fixed and variable components.
C)  increases in direct proportion to changes in activity.
D)  is fixed over some range of activity.E) A) and C)
F) None of the above

Question 5

The contribution margin ratio is calculated as total contribution margin divided by total sales revenue.This is the formula for contribution margin ratio.

Accepted Answer

A) True 
 B)False

Question 6

If sales revenue doubles,fixed costs will

Accepted Answer

A)  decrease in total.
B)  increase in total.
C)  decrease on a per unit basis.
D)  increase on a per unit basis.E) C) and D)
F) None of the above

Question 7

Which of the following is a fixed cost?

Accepted Answer

A)  A cost that is $28.00 per unit when production is 70,000,and $28.00 per unit when production is 112,000.
B)  A cost that is $28.00 per unit when production is 70,000,and $17.50 per unit when production is 112,000.
C)  A cost that is $28.00 per unit when production is 70,000,and $56.00 per unit when production is 112,000.
D)  A cost that is $56.00 per unit when production is 70,000,and $56.00 per unit when production is 112,000.E) None of the above
F) A) and B)

Question 8

Cost behavior is

Accepted Answer

A)  the way in which costs change when the activity level changes.
B)  the difference between sales revenue and fixed costs.
C)  the same as absorption costing.
D)  the amount of sales necessary to achieve a specific profit.E) A) and B)
F) All of the above

Question 9

If a firm uses absorption costing,which of the following actions taken by management would increase gross profit even if sales do not increase?

Accepted Answer

A)  Decreasing production and using items from inventory for sales.
B)  Increasing production and building up inventory.
C)  Increasing fixed costs by investing in new production technology.
D)  Increasing variable costs by purchasing higher-quality materials.E) All of the above
F) A) and C)

Question 10

The difference between variable costing and full absorption costing is due to differences in the treatment of

Accepted Answer

A)  direct costs.
B)  variable manufacturing overhead.
C)  fixed manufacturing overhead.
D)  period costs.E) None of the above
F) All of the above

Question 11

The intercept of the cost line on a scattergraph represents

Accepted Answer

A)  fixed cost per unit.
B)  total fixed cost.
C)  variable cost per unit.
D)  sales price per unit.E) C) and D)
F) All of the above

Question 12

Contribution margin is defined as sales revenue less variable costs.This is the definition of contribution margin.

Accepted Answer

A) True 
 B)False

Question 13

A cost that remains the same,in total,regardless of changes in activity level is a

Accepted Answer

A)  variable cost.
B)  fixed cost.
C)  mixed cost.
D)  step cost.E) C) and D)
F) B) and C)

Question 14

Jasmine Corp.has a selling price of $15,variable costs of $10 per unit,and fixed costs of $25,000.Contribution margin is $65,000.How many units did Jasmine sell?

Accepted Answer

A)  7,000
B)  10,000
C)  13,000
D)  17,000E) A) and B)
F) All of the above

Question 15

Flint Enterprises had the following cost and production information for April: Inventory increased by 3,000 units during April.How much greater will Flint Enterprises' income be under absorption costing than under variable costing?

Accepted Answer

A)  $60,000
B)  $315,000
C)  $340,000
D)  $400,000E) B) and C)
F) None of the above

Question 16

Star,Inc.used Excel to run a least-squares regression analysis,which resulted in the following output: What is Star's variable cost per unit?

Accepted Answer

A)  $0.92
B)  $2.84
C)  $11.57
D)  $12.55E) None of the above
F) A) and C)

Question 17

A variable cost increases in total as the volume increases.Variable costs are those that change,in total,in direct proportion to changes in activity levels.

Accepted Answer

A) True 
 B)False

Question 18

Cypress,which uses the high-low method,had an average cost per unit of $5 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $3.25 at its highest level of activity when sales equaled 24,000 units.Cypress would estimate fixed costs as

Accepted Answer

A)  $30,000.
B)  $6.25.
C)  $1.75.
D)  $50,000.E) None of the above
F) All of the above

Question 19

Stella,Inc.must perform maintenance on its production machinery after every 10,000 units produced.Production varies between 12,000 and 30,000 units a year.The cost of this maintenance would be classified as a

Accepted Answer

A)  variable cost.
B)  fixed cost.
C)  step cost.
D)  mixed cost.E) None of the above
F) B) and C)

Question 20

Lark,which uses the high-low method,had total costs of $25,000 at its lowest level of activity when 5,000 units were sold.When,at its highest level of activity,sales equaled 12,000 units,total costs were $39,000.Lark would estimate fixed costs as

Accepted Answer

A)  $14,000.
B)  $15,000.
C)  $32,000.
D)  $60,000.E) All of the above
F) B) and C)

Exam 5: Cost Behavior

Cypress,which uses the high-low method,had an average cost per unit of $5 at its lowest level of activity when sales equaled 10,000 units and an average cost per unit of $3.25 at its highest level of activity when sales equaled 24,000 units.Cypress would estimate fixed costs as

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A variable cost increases in total as the volume increases.Variable costs are those that change,in total,in direct proportion to changes in activity levels.

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The difference between variable costing and full absorption costing is due to differences in the treatment of

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The contribution margin ratio is calculated as total contribution margin divided by total sales revenue.This is the formula for contribution margin ratio.

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Carson,which uses the high-low method of estimating costs,reported total costs of $24 per unit when production was at its lowest level,at 10,000 units.When production doubled to its highest level,the total cost per unit dropped to $15.Carson would estimate its total fixed cost as

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Fremont,which uses the high-low method,reported total costs of $10 per unit at its lowest production level,5,000 units.When production tripled to its highest level,the total cost per unit dropped to $5.Fremont would estimate its variable cost per unit as

Correct AnswerverifiedShow Answer

Stella,Inc.must perform maintenance on its production machinery after every 10,000 units produced.Production varies between 12,000 and 30,000 units a year.The cost of this maintenance would be classified as a

Correct AnswerverifiedShow Answer

Star,Inc.used Excel to run a least-squares regression analysis,which resulted in the following output: What is Star's variable cost per unit?

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If sales revenue doubles,fixed costs will

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Lark,which uses the high-low method,had total costs of $25,000 at its lowest level of activity when 5,000 units were sold.When,at its highest level of activity,sales equaled 12,000 units,total costs were $39,000.Lark would estimate fixed costs as

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The intercept of the cost line on a scattergraph represents

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Flint Enterprises had the following cost and production information for April: Inventory increased by 3,000 units during April.How much greater will Flint Enterprises' income be under absorption costing than under variable costing?

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If a firm uses absorption costing,which of the following actions taken by management would increase gross profit even if sales do not increase?

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The contribution margin ratio is

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Jasmine Corp.has a selling price of $15,variable costs of $10 per unit,and fixed costs of $25,000.Contribution margin is $65,000.How many units did Jasmine sell?

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A cost that remains the same,in total,regardless of changes in activity level is a

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A step cost

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Which of the following is a fixed cost?

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Contribution margin is defined as sales revenue less variable costs.This is the definition of contribution margin.

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Cost behavior is

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