Question 1

A variable cost increases in total as the volume increases

Accepted Answer

A) True 
 B)False

Question 2

Total contribution margin is defined as:

Accepted Answer

A)   selling price times units sold.
B)   cost to produce times units sold.
C)   total sales revenues less total variable costs.
D)   total variable costs less fixed costs.E) B) and C)
F) None of the above

Question 3

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) None of the above
F) All of the above

Question 4

Booble, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. How much are Booble's fixed costs?

Accepted Answer

A)   $18,000
B)   $45,000
C)   $50,000
D)   $90,000E) C) and D)
F) A) and D)

Question 5

What is the difference between full absorption costing and variable costing?

Accepted Answer

A)   In full absorption costing, all of the non-manufacturing costs are expensed. In variable costing, all of the non-manufacturing expenses are included in the cost of the product.
B)   In full absorption costing, fixed manufacturing overhead is expensed. In variable costing, fixed manufacturing overhead is included in the cost of the product.
C)   In full absorption costing, fixed manufacturing overhead is included in the cost of the product. In variable costing, fixed manufacturing overhead is expensed.
D)   Variable costing must be used for external financial reports while full absorption costing can only be used for internal reporting.E) B) and C)
F) A) and D)

Question 6

Which of the following statements is correct about the difference between contribution margin and gross margin?

Accepted Answer

A)   Contribution margin and gross margin are equivalent.
B)   Contribution margin is the difference between sales revenue and cost of goods sold.
C)   Gross margin is the difference between sales revenue and variable costs.
D)   Gross margin is used for external reporting, while contribution margin is used for internal reporting.E) A) and C)
F) A) and B)

Question 7

The unit contribution margin:

Accepted Answer

A)   equals total sales revenue minus total variable costs.
B)   equals total contribution margin times total units.
C)   tells us how much each additional unit sold above the break-even point will contribute to profit.
D)   equals overall profit per unit.E) A) and C)
F) A) and B)

Question 8

A statistical method for finding the best-fitting cost equation to a set of data is the:

Accepted Answer

A)   scattergraph method.
B)   high-low method.
C)   visual fit method.
D)   least-squares regression methoD.Least-squares regression is the only statistical technique among those listeD.E) A) and B)
F) C) and D)

Question 9

Which of the following is a variable cost?

Accepted Answer

A)   A cost that is $26,000 when production is 65,000, and $26,000 when production is 91,000.
B)   A cost that is $26,000 when production is 65,000, and $36,400 when production is 91,000.
C)   A cost that is $26,000 when production is 65,000, and $52,000 when production is 91,000.
D)   A cost that is $52,000 when production is 65,000, and $52,000 when production is 91,000.E) C) and D)
F) A) and B)

Question 10

The per-unit amount of three different production costs for Thunderbird, Inc., are as follows:  What type of cost is each?

Accepted Answer

A)   Cost A is fixed, Cost B is mixed, Cost C is variable.
B)   Cost A is fixed, Cost B is variable, Cost C is mixed.
C)   Cost A is variable, Cost B is mixed, Cost C is fixed.
D)   Cost A is variable, Cost B is fixed, Cost C is mixeD.A variable cost stays the same per unit but increases in total when production increases, a fixed cost decreases per unit but stays the same in total when production increases, and a mixed cost decreases per unit and increases in total when production increases.E) A) and B)
F) All of the above

Question 11

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) B) and C)
F) C) and D)

Question 12

Fixed costs are expressed _____________ because that is the amount of cost that is truly fixed.

Accepted Answer

A)   on a per unit basis
B)   in total
C)   on a per unit basis within the relevant range
D)   as a percentage of salesE) B) and C)
F) A) and B)

Question 13

Jasper Enterprises had the following cost and production information for April:  How much greater will Jasper Enterprises' income be under absorption costing than under variable costing?

Accepted Answer

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

Question 14

Bayshore, Inc., has collected the following cost data for various levels of activity:  Using the high-low method, determine the variable cost per client served and the total fixed cost.

Accepted Answer

High month: April; low month: ...

Question 15

Regression analysis is a cost-estimating approach that uses _______________ to find the cost line.

Accepted Answer

A)   only two data points
B)   all available data points
C)   only four data points
D)   personal intuitionE) A) and B)
F) A) and C)

Question 16

Jasmine Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of $25,000. Contribution margin is $85,000. How many units did Jasmine sell?

Accepted Answer

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

Question 17

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)   $50,000E) A) and D)
F) B) and D)

Question 18

Aspen Inc has the following information for its first year of operations:  a. Prepare Aspen's full absorption costing income statement.
b. Prepare Aspen's variable costing income statement.

Accepted Answer

a. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> (Cost of goods sold per un...

Question 19

The cost estimating approach that involves "eye-balling" the closest fitting line to the data is the:

Accepted Answer

A)   scattergraph method.
B)   high-low method.
C)   visual fit method.
D)   regression analysis.E) A) and B)
F) A) and C)

Question 20

Which of the following statements is correct about relevant range?

Accepted Answer

A)   The relevant range only applies to fixed costs in the context of "step costs."
B)   The relevant range determines production levels for the company.
C)   The relevant range helps managers make decisions based on normal operations, but the relevant range is not prescriptive beyond the range.
D)   The relevant range is useful for operations managers, but not necessarily for cost managers within a production facility.E) A) and B)
F) B) and C)

Exam 5: Cost Behavior and Estimation

A statistical method for finding the best-fitting cost equation to a set of data is the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct about relevant range?

Correct AnswerverifiedShow Answer

A variable cost increases in total as the volume increases

Correct AnswerverifiedShow Answer

Total contribution margin is defined 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

Booble, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. How much are Booble's fixed costs?

Correct AnswerverifiedShow Answer

Which of the following is a variable cost?

Correct AnswerverifiedShow Answer

The unit contribution margin:

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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 $85,000. How many units did Jasmine sell?

Correct AnswerverifiedShow Answer

Aspen Inc has the following information for its first year of operations: a. Prepare Aspen's full absorption costing income statement. b. Prepare Aspen's variable costing income statement.

Correct Answerverifieda. (Cost of goods sold per un...View AnswerShow Answer

What is the difference between full absorption costing and variable costing?

Correct AnswerverifiedShow Answer

The cost estimating approach that involves "eye-balling" the closest fitting line to the data is the:

Correct AnswerverifiedShow Answer

Bayshore, Inc., has collected the following cost data for various levels of activity: Using the high-low method, determine the variable cost per client served and the total fixed cost.

Correct AnswerverifiedHigh month: April; low month: ...View AnswerShow Answer

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:

Correct AnswerverifiedShow Answer

Jasper Enterprises had the following cost and production information for April: How much greater will Jasper Enterprises' income be under absorption costing than under variable costing?

Correct AnswerverifiedShow Answer

The per-unit amount of three different production costs for Thunderbird, Inc., are as follows: What type of cost is each?

Correct AnswerverifiedShow Answer

Regression analysis is a cost-estimating approach that uses _______________ to find the cost line.

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the difference between contribution margin and gross margin?

Correct AnswerverifiedShow Answer

Fixed costs are expressed _____________ because that is the amount of cost that is truly fixed.

Correct AnswerverifiedShow Answer

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a. (Cost of goods sold per un...
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High month: April; low month: ...
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