Acc exam 3

Which of the following is an assumption underlying standard CVP analysis?

in multiproduct companies, the sales mix is constant.

Which of the following statements is true? 1. Incremental analysis is an analytical approach that focuses only on those revenues and costs that will not change as a result of a decision. 2. When expressed on a per unit basis, fixed costs can mislead decision makers into thinking of them as variable costs. 3. To estimate what the profit will be at various levels of sales volume, multiply the number of units to be sold above or below the break-even point by the unit contribution margin.

2 and 3

Which of the following statements is true? 1. For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales. 2. The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio.

1

Which of the following statements is true? 1. The margin of safety is the amount by which sales can decrease before losses are incurred by the company. 2. The margin of safety percentage is equal to the margin of safety in dollars divided by total contribution margin.

1

Which of the following statements is true? 1. A shift in the sales mix from low-margin items to high-margin items will decrease total profits even though total sales increase. 2. A shift in the sales mix from high-margin items to low-margin items can cause total profits to decrease even though total sales may increase. 3. A shift in the sales mix from products with high contribution margin ratios toward products with low contribution margin ratios will raise the break-even point for the company

2 and 3

Which of the following would be classified as a product-level activity?

Advertising a product.

Which of the following statements is true? 1. The book value of an old machine is always considered an opportunity cost in a decision. 2. A cost that will be incurred regardless of which alternative is selected is not relevant when choosing between the alternatives. 3. A complete income statement need not be prepared as part of a differential cost analysis. 4. An avoidable cost is a sunk cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another.

Both statements II and III are true

Which of the following statements is true? 1. Future costs that do differ among the alternatives are not relevant in a decision. 2. Sunk costs are costs that have proven to be unproductive.

Neither statement is true.

Which of the following statements is true? 1. Segmented statements for internal use should not be prepared using the contribution format. 2. When using segmented income statements, the dollar sales for a company to break even equals the traceable fixed expenses divided by the overall CM ratio.

Neither statement is true.

Which of the following statements is true? 1. When activity-based costing is used for internal decision-making, the costs of idle capacity should be assigned to products. 2. A duration driver provides a simple count of the number of times that an activity occurs.

Neither statement is true.

factory security and assembly activities at an appliance manufacturing plant would be best classified as unit-level, batch-level, product-level, or organization-sustaining activities?

Security:Assembly Organization:Unit

Which of the following is true regarding the contribution margin ratio of a company that produces only a single product?

The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit.

When using data from a segmented income statement, the dollar sales for a segment to break even is equal to:

Traceable fixed expenses ÷ Segment CM ratio

United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their:c

contribution margin per unit of the constrained resource

Allocating common fixed expenses to business segments:

may cause managers to erroneously discontinue business segments.

Which of the following would not affect the break-even point?

number of units sold

Departmental overhead rates may not correctly assign overhead costs due to:

overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

Parts administration is an example of a:

product-level activity