Module 3 managerial accounting video questions

Which of the following statements about the segment margin is not true?

The segment margin is obtained by deducting the common fixed costs that have been allocated to a segment from that segment's contribution margin.

The "degree of operating leverage" is the same thing as "operating leverage".

false

The use of lean production maximizes the difference between absorption and variable costing.

false

Select ALL that apply. The choice to automate the factory:

is an example of moving variable costs such as direct labor to fixed costs such as depreciation on equipment. will change the cost structure of a company will result in the company being more leveraged

After you find the BEP for the total company, to determine the sales for each product, you:

multiple the total company BEP by the sales mix

A company has two products, A and B. The current sales mix is 20% Product A and 80% Product B. Product A has a contribution margin ratio of 50% and Product B has a contribution margin ratio of 30%. Based on this information, which of the following statements are true? Select ALL that apply.

the weighted average contribution margin ratio will be between 30% and 50%. The weighted average contribution margin ratio will be closer to 30% than 50%.

Profit sensitivity and degree of operating leverage are used interchangeably.

true

Solving for target profit sales is very similar to solving for break even point sales. The only adjustment is to make sure the company generates enough contribution margin to cover fixed cost plus the amount of net operating income the company wants to earn.

true

The make up of your cost structure is not "good" or "bad". But there are optimal levels of performance based on expectations of sales.

true

When computing BEP in sales dollars for the total company when they have multiple products you should use the weighted average contribution margin ratio.

true

When solving for break even point in sales dollars, you should use the contribution margin ratio.

true

Which of the following statements are true regarding absorption and variable costing? Select all that apply

Absorption costing treats fixed manufacturing overhead as a product cost, only expensing the fixed manufacturing overhead that is associated with the units that are sold for the period. Variable costing treats fixed manufacturing overhead as a period cost, expensing 100% of the fixed manufacturing overhead costs in the period it is incurred. In periods where the amount of units produced = the amount of units sold, the amount of fixed manufacturing overhead expensed in each period will be the same.

With regards to interpretation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area

Which of the following statements are true. Select all that apply

Cost structure refers to division of fixed and variable costs within a company A cost structure that has a higher percentage of fixed costs is "more leveraged" than one with a higher percentage of variable costs.

What is usually plotted as a horizontal line on the CVP graph

Fixed expense

Advantages to using variable costing include(Select all that apply):

It does a better job explaining changes in NOI when sales change. It enables the use of CVP analysis Theorectially, it treat FMOH as a period cost which matches its cost behavior since fixed cost don't vary with volume changes.

At break even point

Revenue = Total Costs NOI is zero Total contribution margin = Total fixed cost

Assume that fixed manufacturing overhead incurred for the period totaled $500,000 and 10,000 units were produced. For that same period, 12,000 units were sold. Based on this information which of the following statements are true? Select All that apply.

The company will be selling inventory this period that was produced in a previous period Fixed manufacturing overhead expensed under absorption this period will include the full $500,000 incurred this period, plus the fixed manufacturing overhead that was deferred on each of the units you are selling this period that were produced last period.

Which of the following is a common mistake made by companies when assigning costs to segments?

They assign the costs of the corporate headquarters buildings to segments because the segments must cover those costs.

Which of the following statements are True? Select ALL that apply.

Total contribution margin = sales in dollars x contribution margin ratio Equation & formula are basically the same

What is represented on the X axis of a cost-volume-profit (CVP) graph?

Unit volume

A shift in the sales mix from products with high contribution margin ratios toward products with low contribution margin ratios will lower the total contribution margin of a company. Subsequently, the break even point will increase as more products need to be sold to cover fixed costs.

true

Break even point determines the sale volume level, expressed in either units or dollars, in which NOI is zero.

true

Break even point

how much do i need to break even

Operating leverage

how cost structure effects profit elasticity

Margin of safety

how much cushion is there in operations