ACC-Concept 2

What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable? All expenses of the eliminated segment will be eliminated. Net income will increase. The company's variable costs will increase. Net income will decrease.

Net income will decrease.

Which one of the following is not a cost element in manufacturing a product? Entry field with correct answer Direct materials Manufacturing overhead Direct labor Office salaries

Office salaries

Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price? When additional fixed costs must be incurred to accommodate the order When incremental revenues exceed incremental costs When the company thinks it can use the cheaper materials without the customer's knowledge Never

When incremental revenues exceed incremental costs

A mixed cost contains a variable element and a fixed element. both selling and administrative costs. both retailing and manufacturing costs. both operating and nonoperating costs.

a variable element and a fixed element.

An opportunity cost is the potential benefit that may be obtained by following an alternative course of action. is classified as manufacturing overhead. is the cost of a new product proposal. should be initially recorded as an asset.

is the potential benefit that may be obtained by following an alternative course of action.

The relevant range of activity refers to the levels of activity over which the company expects to operate. level of activity where all costs are constant. geographical areas where the company plans to operate. activity level where all costs are curvilinear.

levels of activity over which the company expects to operate.

The amount by which actual or expected sales exceeds break-even sales is referred to as contribution margin. margin of safety. unanticipated profit. target net income.

margin of safety.

Both direct materials and indirect materials are sold directly to customers by a manufacturing company. raw materials. manufacturing overhead. merchandise inventory.

raw materials.

Costs that will differ between alternatives and influence the outcome of a decision are relevant costs. product costs. unavoidable costs. sunk costs.

relevant costs.

Cost behavior analysis is a study of how a firm's costs relate to general price level changes. respond to changes in the gross national product. relate to competitors' costs. respond to changes in the level of business activity.

respond to changes in the level of business activity.

A cost that cannot be changed by any present or future decision is a(n) opportunity cost. sunk cost. incremental cost. variable cost.

sunk cost.

A cost which remains constant per unit at various levels of activity is a mixed cost. manufacturing cost. variable cost. fixed cost.

variable cost.

What activities and responsibilities are not associated with management's functions? Planning Controlling Directing Accountability

Accountability

Which one of the following is not an assumption of CVP analysis? All costs are variable costs. Sales mix remains constant. The behavior of costs and revenues are linear within the relevant range. All units produced are sold.

All costs are variable costs.

Which of the following stages of the management decision-making process is improperly sequenced? Evaluate possible courses of action → Make decision. Identify the problem → Determine possible courses of action. Assign responsibility for the decision → Identify the problem. Assign responsibility for decision → Determine possible courses of action.

Assign responsibility for the decision → Identify the problem.

Which of the following is not a mixed cost? Electricity Telephone Expense Depreciation Car rental fee

Depreciation

Which of the following is not a fixed cost? Property taxes Direct materials Lease charge Depreciation

Direct materials

Which of the following is not a benefit of activity-based costing? Less costly to use More accurate product costing Enhanced control over overhead costs Better management decisions

Less costly to use

What of the following would not be relevant in a make-or-buy decision? Unavoidable variable costs Avoidable fixed cost Incremental fixed costs Opportunity costs

Unavoidable variable costs

Contribution margin is unit selling price less unit fixed costs. the amount of revenue remaining after deducting fixed costs. available to cover fixed costs and contribute to income for the company. sales less fixed costs.

available to cover fixed costs and contribute to income for the company.

Manufacturing overhead is applied to each job only if the overhead costs can be directly traced to that job. at the end of the year when actual costs are known. at the time when the overhead cost is incurred. by means of a predetermined overhead rate.

by means of a predetermined overhead rate.

Nonfinancial information that management might evaluate in making a decision would not include the environment. employee turnover. the corporate profile in the community. contribution margin.

contribution margin.

When deciding whether or not to replace old equipment with new equipment, the overriding consideration is the book value of the old equipment. cost of replacing the old equipment. difference between future cost savings and the new equipment's costs. salvage value of the old equipment.

difference between future cost savings and the new equipment's costs.

Fixed costs normally will not include direct labor. supervisory salaries. depreciation on buildings and equipment. property taxes.

direct labor.

Required sales in dollars to meet a target net income is computed by dividing fixed costs plus target net income by contribution margin ratio. variable costs plus target net income by unit contribution margin. total costs plus target net income by contribution margin ratio. fixed costs plus target net income by unit contribution margin.

fixed costs plus target net income by contribution margin ratio.