ch. 21 accounting

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.

True

Which of the following describes the behavior of a variable cost per unit?

remains constant with changes in the activity level

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

salary of a factory supervisor

As production increases, variable costs per unit

stay the same

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

true

Cost behavior refers to the manner in which a cost changes as the related activity changes.

true

For purposes of analysis, mixed costs can generally be separated into their variable and fixed components.

true

In cost-volume-profit analysis, all costs are classified into which of the following two categories?

variable costs and fixed costs

Cost behavior refers to the manner in which a cost

changes as the related activity changes

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

contribution margin ratio

A low operating leverage is normal for highly automated industries.

False

Companies with large amounts of fixed costs will generally have a high operating leverage.

False

If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point.

False

Which of the following describes the behavior of the fixed cost per unit?

decreases with increasing production

Which of the following is an example of a cost that varies in total as the number of units produced changes?

direct materials cost

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours are an example of a fixed cost.

false

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.

false

Total fixed costs change as the level of activity changes.

false

Variable costs are costs that remain constant in total dollar amount as the level of activity changes.

false

Variable costs are costs that vary on a per-unit basis with changes in the activity level.

false

The three most common cost behavior classifications are

fixed costs, variable costs, and mixed costs