accounting exam 2 smartbook

CVP analysis can help answer the question of _____.

-how net income can be increased

In the equation Y = a + bX, b denotes the ______.

-variable cost per unit of activity -slope of the line

Contribution margin ______.

covers fixed cost and profit

Which of the following are assumptions of cost volume profit analysis?

-In multi-product companies, the sales mix is constant. -Production volume is equal to sales volume. -All costs can be classified as either fixed or variable.

Why is it important to analyze mixed costs?

-To make decisions, managers need to know how costs change. -Managers need to know how much of a cost is variable and how much is fixed.

Using the high-low method, the fixed cost is calculated ______.

-after the variable cost per unit is calculated -using either the high or low level of activity

CVP ______.

-allows managers to see how changing one variable can impact another -can be used to make many different decisions -can be used for "what-if" analysis

Step costs ______.

-are fixed over some range of activity -may be either step-fixed or step-variable

Multi-product target profit analysis__________

-depends upon the sales mix -is calculated the same way as single product analysis

The weighted average unit contribution margin ______.

-is based on the relative percentage of each unit sold -assumes that the percentage of each product sold is constant -is used instead of the single product contribution margin in multi-product break-even analysis

Multi-product target profit analysis ______.

-is calculated the same way as single product analysis -depends upon the sales mix

The high-low method ______.

-only uses two data points -only uses two data points -provides a reasonable estimate as long as the data points are within the relevant range

In the equation Y = a + bX, a denotes the ______.

-total fixed costs -intercept

Methods that can be used to model the relationship between revenues, costs, profit and volume include the ______________________contribution margin method and the contribution __________ ___________ method.

-unit -margin ratio

Using the high-low method, the fixed cost is calculated ______.

-using either the high or low level of activity -after the variable cost per unit is calculated

Which tool can be used to easily calculate the change in profit resulting from a change in sales price, sales volume, variable costs, or fixed costs?

CVP analysis

Degree of operating leverage equals ______.

Contribution margin/Net operating income

A simple approach that uses the two most extreme activity observations is the ___________-______________ method.

High- Low Method

Which of the following is not a method used to estimate the fixed and variable portions of mixed costs?

Relevant range analysis

The format used to prepare a contribution income statement is ______.

Sales - Variable expenses = Contribution margin - Fixed expenses = Net income

The equation for the profit equation method is ______.

Total Sales Revenue - Total Variable Costs - Total Fixed Costs = Profit

Step-fixed costs ______.

are fixed over a fairly wide range of activity

A shift from product costing to a focus on cost _______ is the key to making most managerial decisions.

behavior

A shift from product costing to a focus on cost __________ is the key to making most managerial decisions.

behavior

How total costs changes as some level of activity changes is called cost ______.

behavior

How total costs changes as some level of activity changes is called cost _________

behavior

Which of the following is NOT a method used for basic CVP analysis?

break even analysis

Mixed costs ______.

change both in total and per unit as activity changes

mixed costs

change both in total and per unit as activity changes

mixed costs _____

change both in total and per unit as activity changes

Sales revenue minus variable costs equals _______ ____________

contribution margin

The amount each unit sold contributes towards fixed costs and profit is the unit ________ _________

contribution margin

How much contribution margin is generated by every dollar of sales is shown by the ______.

contribution margin ratio

How much contribution margin is generated per dollar of sales revenue is the _________ _________________ _________________

contribution margin ratio

The contribution margin stated as a percentage of sales dollars is the ______.

contribution margin ratio

The weighted-average ______________ _______________ _____________is based on the relative percentage of total sales revenue in dollars, not units.

contribution margin ratio

When a company increases the selling price of a product with no change in variable cost per unit or total fixed costs, the break-even point for that product will ______.

decrease

The formula to calculate the variable cost per unit using the high-low method is ______.

difference in total cost divided by difference in activity

Costs that remain constant in total and vary per unit are called _______ costs.

fixed

Costs that remain constant in total and vary per unit are called __________ costs

fixed

A fixed cost remains fixed ______ within the relevant range of activity.

in total

A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called ______.

least squares regression

When using ______, proper interpretation of the results is critical.

least squares regression

The best fitting line minimizes the sum of the squared errors when using ______.

least-square regression

The excess of the budgeted (or actual) sales dollars over break-even sales is called the ________ of ___________

margin of safety

Decisions about whether to use fixed or variable costs to run a business affects a company's ________ leverage.

operating

Decisions about whether to use fixed or variable costs to run a business impact a company's ______.

operating leverage

According to the assumptions of CVP, ______ will not change as the volume of a product increases or decreases.

price

Cost assumptions are reasonably valid within the ________ of activity.

relevant range

Cost assumptions are reasonably valid within the ___________ _______ of activity

relevant range

The level of activity over which cost behavior assumptions are true is known as the _______ ________

relevant range

When multiple products are sold, the break-even point depends on the ____________ mix.

sales

When preparing a multi-product break-even analysis, the assumption is ordinarily made that the ______ will not change.

sales mix

A limitation of ______ is that it is (they are) subjective and inexact.

scattergraph

A visual representation of the relationship between cost and activity is provided by a(n) __________

scattergraph

To answer preliminary questions such as whether the linearity assumption is valid, accountants use a(n)

scattergraph

To answer preliminary questions such as whether the linearity assumption is valid, accountants use a(n) ___________

scattergraph

Mixed costs are also commonly known as _______ costs.

semi variable

Mixed costs are also commonly known as ________ costs

semi variable

When constructing a CVP graph, the ______________ of the line represents variable cost per unit.

slope

The unit contribution margin ______.

tells how much each additional unit contributes to profit

In the equation Y= a + bX, Y is the ______.

total mixed costs

The weighted-average contribution margin ratio is calculated using the ______.

total sales mix

When using the high-low method, fixed costs are calculated after variable costs are determined.

true

The amount that each unit sold contributes to fixed costs and profit is ______.

unit contribution margin

Contribution margin ratio is ______.

unit contribution margin/unit sales price

The weighted average unit contribution margin is the average unit contribution margin of multiple products weighted according to ______.

units sold

A cost that changes in direct proportion to changes in the activity level is a ______ cost.

variable

Which type of cost changes in total, in direct proportion to changes in activity level?

variable

when using the high-low method, the slope of the line equals the _______ ,cost per unit of activity.

variable

When preparing a CVP graph, the slope of the total cost line represents ______.

variable cost per unit

When using the high low method, the difference in cost divided by the difference in activity is ______.

variable cost per unit

The high-low method may provide a reasonable estimate of fixed and variable costs as long as the high and low data points fall ______ the relevant range.

within

The goal of break-even analysis is to find the level of sales where profit is equal to ______.

zero

Which of the following statements are true?

-Mixed costs contain both fixed and variable cost elements. -Both the total cost and the per-unit cost of mixed costs change with changes in the level of activity. -The equation for a straight line can be used to express the relationship between mixed costs and the level of activity.

Which of the following statements are true?

-Scattergraphs are a way to diagnose cost behavior. -Scattergraphs are used to help determine if the linear assumption is reasonable.

The high-low method ______

-provides a reasonable estimate as long as the data points are within the relevant range -calculates the line based on the most extreme activity data points -only uses two data points

Fixed costs ______.

-remain constant in total within the relevant range of activity -should not be expressed on a per unit basis when making decisions -generally include rent and supervisor salaries

In the profit equation, total ______ is a function of the number of units sold (Q).

-sales revenue -variable costs

A contribution margin income statement ______.

-separates costs into their fixed and variable components -can assist with management decision making

CVP analysis can be useful in deciding ______.

-which products to offer -what marketing strategy to use -which services to offer -what price to charge for goods or services -what cost structure to implement

If a company raises the price of a product with no change in costs, the unit contribution margin and contribution margin ratio will ______.

both increase

If a company raises the price of a product with no change in costs, the unit contribution margin and contribution margin ratio will __________

both increase

CVP analysis is only used for break-even and target profit analysis.

false

Cost structure refers to how a company uses product and period costs in an organization.

false

The margin of safety is the excess of break-even sales dollars over budgeted (or actual) sales dollars.

false

The terms operating leverage and financial leverage refer to the same concept.

false

Decisions about the use of debt versus equity affects a company's ________ __________

financial leverage