Accounting II Exam II

Booble, Inc. has a contribution margin ratio of 45%. This month, sales revenue was $200,000, and profit was $40,000. If sales revenue increases by $20,000, by how much will profit increase?

$9,000

Break-even sales equals what?

Break-Even Units x Unit Sales Price

Which of the following types of decisions involves deciding whether to eliminate a particular division or segment of the business?

Continue-or-discontinue

Relevant costs do what?

Have the potential to influence a decision

Total cost is equaled to what?

Total Fixed Cost + (Variable cost per Unit x Activity)

Target Units equals what?

Total Fixed Costs + Target divided by Profit

A graph of the relationship between the total cost and the activity level is called a

scattergraph.

Degree of operating leverage is equal to what?

Contribution margin divided by Net operating income

Contribution margin ratio is equaled to what?

Contribution margin divided by sales revenue.

What are irrelevant costs?

Costs that will not influence a decision.

What are the 2 criteria for a relevant cost?

Occurs in the future, and differs between decision alternatives.

Contribution margin is defined as:

Sales revenue minus variable expenses.

What are costs that have been incurred in the past?

Sunk costs.

Which of the following is not relevant to a sell-or-process further decision?

The cost of processing the product "as is".

What is margin of safety?

The difference between actual or budgeted sales and the break-even.

Contribution margin is equaled to what?

The difference between sales revenue and variable costs.

Target sales equals what?

Total Fixed Costs + Total Profit divided by Contribution Margin Ratio

Break-even sales can also equal what?

Total fixed costs divided by unit contribution margin

What is a special order?

a one-time order that is outside the scope of normal sales.

Net operating income under variable and absorption costing will generally:

be equal only when production and sales are equal.

If sales revenue doubles, variable costs will

increase in total.

A statistical method for finding the best-fitting cost equation to a set of data is the

least-squares regression method.

The high-low method is a cost estimating approach that uses _______________ to find the cost line.

only two data points.

the foregone benefit of choosing one alternative over another is measured by

opportunity costs.

Flupper, Inc. must perform maintenance on its production machinery after every 10,000 units produced. Production varies between 12,000 and 30,000 units a year. The cost of this maintenance would be classified as a

step cost.