ACC- ch5
Bakers contribution margin ratio is 60%, which means that a $7000 increase in sales will result in a __________ increase in net operating income
$4200
step costs:
-are fixed over some range of activity -may be either step-fixed or step-variable
fixed costs:
-generally include rent and supervisor salaries -should not be expressed on a per unit basis when making decisions -remain constant in total within the relevant range of activity
full absorption costing:
-required for external reporting -assigns all manufacturing costs to products
A contribution margin income statement
-separates costs into their fixed and variable components -can assist with management decision making
In the equation Y = a+bx, "b" denotes the
-slope of the line -variable cost per unit of activity
using the high-low method, the fixed cost is calculated:
-using either the high or low level of activity -after the variable cost per unit is calculated
in Y= Mx+b, B is:
-variable cost per unit if activity -slope of the line
a limitation of ________ is that it is subjective and inexact
a scattergraph
a shift from product costing to a focus on cost ______ is the key to making most managerial decisions
behavior
managers use cost ______ to predict how costs will change as the level of activity changes
behavior
when using the high-low method, if the high or low levels of cost do not match the high or low levels of activity:
choose the periods with the highest and lowest level of activity and their associated costs
sales revenue - variable costs:
contribution margin
variable costs remain fixed in total within the relevant range of activity
false
_______ costs remain constant in total and vary per unit
fixed
contribution margin first goes to cover ______ ______.
fixed costs
a fixed cost remains fixed _____ within the relevant range of activity
in total
variable costs vary _______ within the relevant range of activity
in total
fixed costs should not be expressed on a per unit basis because
it may make managers believe they can reduce costs by producing more
a method that uses all the available data points to divide a mixed cost into its fixed and variable components is called
least-squares regression
the _____ assumption is that the relationship between total cost and activity can be approximated by a straight line
linearity
cost assumptions are reasonably valid within the _______ ________ of activity
relevant range
level of activity over which cost behavior assumptions are true is known as the:
relevant range
low level of activity over which cost behavior assumptions are true is known as the
relevant range
which of the following is not a method used to estimate the fixed and variable portions of mixed costs?
relevant range analysis
variable costs:
remain constant per unit and vary in total
format used to prepare a contribution income statement:
sales - variable expenses = contribution margin - fixed expenses = net income
contribution margin is:
sales revenue - variable cost
a ______ gives a visual representation of the relationship between cost and activity
scattergraph
a statistical technique for finding the best fitting line based on historical data is
the least-squares regression
presenting fixed costs on an average per unit basis makes them look like they are variable costs
true
Mixed costs are also commonly known as semi-_______ costs
variable
when using the high-low method, the slope of the line equals the _____ cost per unit of activity
variable
which type of cost changes in total, in direct proportion to changes in in activity level?
variable
within the relevant range, _____ costs remain constant on a per unit basis
variable
within the relevant range, _________ remain constant on a per unit basis
variable costs
