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)