chap 20 acct 6010
the fixed cost line of a cost-volume profit graph
is horizontal throughout a company's relevant range of activity, has a slope of 0
income tax expense
none
which of the following might cause total variable cost behavior to appear as a curvilinear function?
production schedule requires employees to work overtime, discount for volume purchases of materials
sales of those products in a company's sales mix with the highest contribution margins often are referred to as __ sales
quality sales
which of the following might cause fixed cost behavior to appear as a stair-step function ?
renting additional storage warehouse space as output volume increases to higher and higher levels, adding additional supervisors as output volume increases to higher and higher levels
which of the following are underlying assumptions of cost-volume profit analysis
sales price per unit remains constant, sales mix of multiple products remain constant, fixed costs remain constant at all level of sales,
a company's expected dollar change __ volume multiplied by its __ __ __ equals its estimated change in operating income
sales, contribution margin ratio
salaries, base + commission
semivariable cost
as activity base volume decreases, total fixed costs
stay the same
as input units of a particular activity base increase, the difference between the average total cost per unit of that activity base and the average fixed cost per unit of that activity base
stays the same, equals the variable cost per unit of that activity base
variable costs examples
supplies, electricity, machine repairs, fuel,
income taxes are neither a fixed cost nor a variable cost because they depend on a company's __ __ rather than sales volume
taxable income
what happens as input units of a particular activity base increase?
the average fixed cost per unit of that activity base decreases, the average total.cost per unit of that activity base decreases
True or False: businesses tend to operate somewhere between 45% and 80% of full capacity to avoid large fluctuations in volume that can cause irregular cost behavior patterns
true
which of the following is the formula for determining the sales volume required in units to earn a desired level of operating income?
units = (fixed costs + target operating income) / contribution margin per unit
semivariable costs are sometimes called mixed costs because they contain both
variable and a fixed component
cost of goods sold
variable cost
a company has a contribution margin per unit of $60 and an average selling price of $100 per unit. given this info, which of following statements is true?
variable costs equal $40 per unit
fixed cost examples
warehouse rent, admin and exec salaries, property taxes, rents and leases, insurance protection
the term profit in a cost volume profit analysis refers to operating income because
income taxes and nonoperating gains and losses do not possess the characteristics of variable or fixed costs
increase in volume of activity
increases TOTAL semivariable costs, semivariable cost per unit decreases
increase in volume of activity
increases TOTAL variable cost, variable cost per unit remains constant
increase in volume of activity
TOTAL fixed cost remains constant, fixed cost per unit decreases
select the benefits of adopting and implementing an activity based costing system
a better understanding of its overhead cost structure, a better understanding of the resource requirements of each product line, better ID of operating inefficiencies
Cost-volume-profit (CVP) analysis, managers identify __ that cause increases or decreases in various __
activities, costs
which of the following is an example of a variable cost?
annual cost of goods sold
the economies of scale achieved by increasing production output cause which of the following to decrease
average fixed cost per unit, average total cost per unit
the slope of total revenue line of a cost volume profit graph equals
average selling price per unit
which of the following questions is well suited for cost volume profit analysis?
how many units must be sold to achieve a target level of operating income? what level of sale must be generated to break even? what will happen to Profitability if capacity is expanded?
calculated on a per unit basis, a company's contribution margin ratio equals its __ __ per unit divided by its average unit __ __
contribution margin, sales price
the unit cost savings that result from increasing output by using production facilities more intensively are referred to as
economies of scale
as input units of a particular activity base increase, the difference between the average total cost per unit of that activity base and the average fixed cost per unit of that activity base
equals the variable cost per unit of the activity base, stays the same
depreciation expense, double declining method
fixed
depreciation, straight line
fixed
property tax expense
fixed cost
costs that do not change significantly in response to changes in an activity base are referred to as
fixed costs