chapter 1 homework
which of the following statements are true?
-a mixed cost has a minimum cost of having a service available and ready for use -when mixed costs are represented by a straight-line the steeper the slope, the higher the variable cost per unit
the degree of operating leverage:
-decreases as sales and profits rise -is greatest at sales levels near the break-even point -is not a constant
fixed costs that can be cut-back or eliminated without significant damage to a companys long-term goals are_____ fixed cost and _____ fixed costs can not be easily changed or eliminated
-discretionary or managed -committed
administrative costs include:
-executive compensation and public relations costs
which of the following are most likely fixed costs
-factory rent -administrative salaries -factory insurance
a company with a high ratio of fixed costs:
-is more likely to experience a loss when sales are down than a company with mostly variable costs -is more likely to experience greater profits when sales are up than a company with mostly variable costs
an activity base:
-is sometimes called a cost driver -a measure whatever causes costs to vary
common activity bases include:
-machine hours -direct labor hours -units sold
common activity bases include:
-machine hours -units sold -direct labor hours
discretionary fixed costs include
-management training programs -advertising
indirect materials include:
-nails, glue, and thread
which of the following statements are ture
-period costs are expensed in the same period in which they are incurred -sales commissions are period costs
within the relevant range, fixed costs:
-remain constant in total regardless of changes in activity -should not be expressed on a per unit basis when making decisions -generally include rent and supervisor salaries
non-manufacturing costs include:
-sales commissions -company presidents salary
within the relevant range, fixed costs:
-should not be expressed on a per unit basis when making decisions -remain constant in total regardless of changes in activity -generally include rent and supervisor salaries
committed fixed costs include:
-top management salaries -real estate taxes
in the equation Y= a + bX, b denotes the:
-variable cost per unit of activity -slope of the line
within the relevant range of activity, variable costs....
-vary in total -remain constant per unit
operating leverage
a measure of how sensitive net operating income is to a given percentage change in sales dollars
fixed costs that cannot easily be changed and often lock a company into a multi-year decision are
committed fixed costs
the degree of operating leverage=
contribution margin/net operating income
fixed costs that usually arise from annual spending decisions by management are
discretionary fixed costs
true or false: cost structure refers to the relative portion of product and period costs in an organization
false
within the relevant range of activity, _______ costs remain constant in total
fixed
the term "cost structure" refers to the relative proportion of _____ and ______ costs in an organization
fixed and variable
if operating leverage is high, a small percentage increase in sales product a ______ percentage in net operating income than if operating leverage is low
higher
fixed costs that cannot easily be changed and often lock a company into a multi-year decision are
managed fixed costs
a cost contains both variable and fixed cost elements is a...
mixed cost
operating leverage is a measure of how sensitive _____ is to a given percentage change in sales dollars
net operating income
variable costs_____
remain constant in total and vary per unit
variable costs....
remain constant per unit and vary in total
mixed costs are also commonly know as
semi-variable costs
an increase in sales will increase net operating income by a multiple of that increase in sales. the multiple is known as:
the degree of operating leverage
in the equation Y= a + bX, Y is the:
total mixed cost
true or false: presenting fixed costs on an average per unit basis makes them look like they are variable costs
true
true or false: presenting fixed costs on an average per unit basis makes them look like they are variable costs.
true
cost of goods sold for a merchandising company, direct materials and commissions are all examples of _____
variable costs
variable costs:
what remains constant per unit and vary in total (a type of cost)