Chapter 12

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

fixed

The higher a firm's contribution margin ratio, the greater its operating:

leverage

Managerial accounting provides information for:

planning, control, and decision-making

A traditional income statement format is organized by function, whereas a contribution margin format income statement is organized by __________ _________ pattern.

cost behavior

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

its breakeven point

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

scattergram

A firm calculates the average contribution margin ratio when _____.

the firm sells more than one product

At the breakeven point, operating income is equal to _____

zero

Which of the following equations describes the breakeven point?

- contribution margin = fixed expenses - total revenue = total expenses - operating income = 0

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

- hourly wages -production supplies -sales commissions

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 _____________ contribution margin ratio.

average

the logical sequence of activities:

1. planning 2. controlling 3. managing

Managerial accounting provides information for use within an organization.

True

True or false: Operating leverage should inform management's decisions about whether to incur variable costs or fixed costs in its cost structure.

True

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

capacity

When classifying costs for managerial accounting purposes, it is important to recognize that each cost must be viewed __________ for each planning, control, or decision-making situation.

differently

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 the activities performed in the management planning and control cycle is:

planning, managing, controlling

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

1. revenue 2. variable expense 3. contribution margin 4. fixed expense 5. operating income

True or False: Cost behavior implies that people accountable for costs would react negatively to increases in the cost.

False

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

activity

When the number of units sold is _____.

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

Which of the following elements are included in the contribution margin income statement format?

- fixed expenses - operating income - variable expenses - revenues - contribution margin

In the planning and control cycle, feedback is obtained by comparing planned activity with __________ results.

actual

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 x Volume of activity)

The relevant range assumption relating to fixed costs refers to:

a firm's range of activity

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

cost