ACCY 200 UIUC Exam 2

Contribution margin can be expressed as:A) Sales minus variable expenses.B) Sales minus cost of goods sold.C) Sales minus fixed expenses.D) The level of sales required to cover variable expenses.E) The level of sales required to cover fixed and variable expenses.

A) Sales minus variable expenses.

Which of the following is the correct calculation for the contribution margin ratio?A) Revenue divided by variable costs.B) Revenue divided by contribution margin.C) Contribution margin divided by variable costs.D) Contribution margin divided by fixed costs.E) Contribution margin divided by revenue.

Contribution margin divided by revenue (NOT SURE)

Cost behavior refers to:A) Costs that are both good and bad.B) Costs that are variable or fixed.C) Costs that decrease at a quicker rate than others.D) Costs that increase at a quicker rate than others.E) None of the above.

Costs that are variable or fixed.

In considering whether to accept a special order at a price less than the normal selling price of the product, but the additional sales will make use of presently idle capacity, which of the following costs will not be relevant?A) Fixed manufacturing overhead that can be avoided.B) Direct materials.C) Variable overhead.D) Depreciation of the manufacturing plant.E) Direct labor.

Depreciation of the manufacturing plant.

At the break-even point: Fixed cost is always more than the total contribution margin. Fixed cost is always less than the total contribution margin. Fixed cost is always equal to the total contribution margin. Fixed cost is always equal to variable cost. Fixed cost is always more than variable cost.

Fixed cost is always equal to the total contribution margin.

Arrange the following items on the contribution margin income statement in the correct order.

Revenue (top) variable expense contribution margin fixed expense operating income

In capital budgeting, the cash receipts and disbursements associated with a capital expenditure over its life is known as

cash flows

When analyzing capital expenditure decisions, the key factor used to equate the value of money over varying lengths of time is:

compound interest

When considering the decision for solving product mix problems involving multiple products and scarce production resources, the decision should focus on:

contribution margin per unit of scarce resource

In managerial accounting, the term _____________ means different things depending on the situation.

cost

A traditional income statement format is organized by function, whereas a contribution margin format income statement is organized by

cost behavior

The management activity that occurs in each phase of the planning and control cycle is:

decision making

When considering two decision alternatives, _____________ costs are those costs that would result from selecting one alternative instead of the other.

differential

Relevant costs in short-run decisions are:

future costs that represent differences between decision alternatives

A company's margin of safety calculation is an indication of how closely the company is operating relative to

its breakeven point

A capital budget provides the organization an overall blueprint to help the organization meet its:

long-term growth and profitability objectives

Managerial accounting provides information for:

planning, control, and decision-making

If the selling price and variable expense per unit were to drop $2 and fixed expenses remain the same, the breakeven point would

remain the same

From the following cost examples, identify those that are variable costs.

sales commissions, production supplies, hourly wages

When considering the product mix decision and the allocation of scarce production capacity resources, the objective is to maximize contribution margin in terms of the

scarce resource

The high-low method of analyzing the cost behavior of a mixed cost uses a(n) ______________________to illustrate cost and volume data

scattergram

The discount rate used in the present value calculations of a capital budgeting expenditure decision is known as:

the cost of capital

A firm calculates the average contribution margin ratio when

the firm sells more than one product

The relevant range assumption is about ____________________ and suggests that the level of fixed costs will remain constant only within certain ranges of activity.

capacity

As the volume of activity changes, a(n) ___________________cost remains constant in total.

fixed

Capital budgeting is different than operational budgeting because of the long-term time frame of the capital budget. Therefore, capital budgeting:

focuses on the present value of cash flows from investments

A relative measure of risk that describes a company's current sales performance in relation to its break-even sales is called the

margin of safety

The logical sequence of activities performed in the management planning and control cycle is:

planning, managing, controlling

Future costs that represent differences between decision alternatives and are the key to effective decision making are called ______________ costs.

relevant

At the breakeven point, operating income is equal to

0

Using the high-low method produces a cost formula for expressing the total of a mixed cost at any level of activity, which is:

Total cost = Fixed cost + (Variable rate * Volume of activity)

Cost behavior implies that people are NOT accountable for costs would react negatively to increases in the cost.

True

Managerial accounting provides information for use within an organization.

True

The concept of different costs for different purposes means that costs must be viewed differently depending on the planning, control, or decision-making situation.

True

The relevant range assumption relating to fixed costs refers to:

a firm's range of activity

A cost behavior pattern describes the relationship of total cost to volume of

activity

When a company has different products with different contribution margin ratios, the relationship of total company contribution margin to total company sales revenue is known as the

average contribution margin ratio

When the number of units sold is _____.

below the breakeven point, loss equals each unit unsold below the breakeven point multiplied by the contribution margin per unit. AND above the breakeven point, profit equals units sold above the breakeven point multiplied by the contribution margin per unit.