ACCY 200 CQ 6 (CH. 12 & 16S)

An example of a cost likely to have a mixed behavior pattern is:

Electricity cost of the manufacturing plant

In considering whether to accept a special order at a price less than the normal selling price of the product and where the additional sales will make use of present idle capacity, which of the following costs will not be relevant?

Fixed manufacturing overhead that cannot be avoided.

Which of the following terms do not appear on the contribution margin format income statement?

Gross profit

Which of the following statements does not describe a characteristic of management accounting?

Management accounting must conform to GAAP.

The concept of operating leverage refers to which of the following?

Operating income changes proportionately more than revenues for any given change in activity level.

Each of a company's 2 product lines has a different contribution margin ratio. if total sales remains the same but the sales mix changes to the high margin product then:

Operating income will increase average contribution margin ratio will increase break even point will decrease

To which function of management is CVP analysis most acceptable?

Planning

Which of the following is another term for mixed costs?

Semivariable costs

Managerial accounting can best be described as:

The preparation and use of accounting information within the organization

the relevant range concept refers to

a firm's range of activity

An example of a cost likely to have a fixed behavior pattern is:

advertising cost.

Relevant costs in decision-making

are future costs that represent the differences between decision alternatives

In a make or buy decision, which of the following costs would be considered relevant?

avoidable costs

Performance analysis in the planning and control cycle relates to the act of:

controlling.

When the high-low method of estimating a cost behavior pattern is used:

cost and volume data must be reviewed for outliers.

The contribution margin format income statement is organized by:

cost behavior (fixed or variable) classifications.

Cost behavior refers to:

costs that are variable or fixed.

As the level of activity increases fixed cost per unit:

decreases

Opportunity costs are:

foregone benefits.

The scattergram allows cost-volume relationships to be visually scanned for outlier observations that should be:

ignored in the calculation of the cost formula of a mixed cost

As the level of activity increases variable cost per unit

increases

A cost is considered relevant if

it makes a difference

Managerial accounting, as opposed to financial accounting is primarily concerned with

present and future planning and control

An example of a cost that is likely to have a variable behavior pattern is:

production labor wages.

Simplifying assumptions made when using cost behavior pattern data include:

relevant range and linearity

When a cost formula is used to describe a mixed (semi-variable) cost behavior pattern, total costs are expected to increase and per unit variable costs are expected to:

remain constant as the level of activity increases.

The decision to continue or discontinue a segment of the business should focus on:

sales - total variable expenses and *avoidable* fixed expenses of the segment.

A(n) ______ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned.

target cost

Knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes:

the effect on net income will depend on the behavior pattern of various costs.

The relevant range concept refers to:

the range of activity where cost relationships are valid

As the total volume of activity changes

the total of variable costs changes

ABU Co. has several products, each with a different contribution margin ratio. Same number of units in july as in june but the sales mix changed:

total contribution margin in july would be different than in june

The contribution margin format income statement:

uses a behavior pattern classification for costs rather than a functional cost classification approach.

Managerial accounting, as compared to financial accounting:

uses frequent and prompt control reports.

Which of the following is the correct calculation for the contribution margin ratio?

Contribution margin / sales revenue

A sunk cost is:

Cost that has been incurred and can't be eliminated Not relevant in decision making Not a differential cost