chap 20 acct 6010

the fixed cost line of a cost-volume profit graph

is horizontal throughout a company's relevant range of activity, has a slope of 0

income tax expense

none

which of the following might cause total variable cost behavior to appear as a curvilinear function?

production schedule requires employees to work overtime, discount for volume purchases of materials

sales of those products in a company's sales mix with the highest contribution margins often are referred to as __ sales

quality sales

which of the following might cause fixed cost behavior to appear as a stair-step function ?

renting additional storage warehouse space as output volume increases to higher and higher levels, adding additional supervisors as output volume increases to higher and higher levels

which of the following are underlying assumptions of cost-volume profit analysis

sales price per unit remains constant, sales mix of multiple products remain constant, fixed costs remain constant at all level of sales,

a company's expected dollar change __ volume multiplied by its __ __ __ equals its estimated change in operating income

sales, contribution margin ratio

salaries, base + commission

semivariable cost

as activity base volume decreases, total fixed costs

stay the same

as input units of a particular activity base increase, the difference between the average total cost per unit of that activity base and the average fixed cost per unit of that activity base

stays the same, equals the variable cost per unit of that activity base

variable costs examples

supplies, electricity, machine repairs, fuel,

income taxes are neither a fixed cost nor a variable cost because they depend on a company's __ __ rather than sales volume

taxable income

what happens as input units of a particular activity base increase?

the average fixed cost per unit of that activity base decreases, the average total.cost per unit of that activity base decreases

True or False: businesses tend to operate somewhere between 45% and 80% of full capacity to avoid large fluctuations in volume that can cause irregular cost behavior patterns

true

which of the following is the formula for determining the sales volume required in units to earn a desired level of operating income?

units = (fixed costs + target operating income) / contribution margin per unit

semivariable costs are sometimes called mixed costs because they contain both

variable and a fixed component

cost of goods sold

variable cost

a company has a contribution margin per unit of $60 and an average selling price of $100 per unit. given this info, which of following statements is true?

variable costs equal $40 per unit

fixed cost examples

warehouse rent, admin and exec salaries, property taxes, rents and leases, insurance protection

the term profit in a cost volume profit analysis refers to operating income because

income taxes and nonoperating gains and losses do not possess the characteristics of variable or fixed costs

increase in volume of activity

increases TOTAL semivariable costs, semivariable cost per unit decreases

increase in volume of activity

increases TOTAL variable cost, variable cost per unit remains constant

increase in volume of activity

TOTAL fixed cost remains constant, fixed cost per unit decreases

select the benefits of adopting and implementing an activity based costing system

a better understanding of its overhead cost structure, a better understanding of the resource requirements of each product line, better ID of operating inefficiencies

Cost-volume-profit (CVP) analysis, managers identify __ that cause increases or decreases in various __

activities, costs

which of the following is an example of a variable cost?

annual cost of goods sold

the economies of scale achieved by increasing production output cause which of the following to decrease

average fixed cost per unit, average total cost per unit

the slope of total revenue line of a cost volume profit graph equals

average selling price per unit

which of the following questions is well suited for cost volume profit analysis?

how many units must be sold to achieve a target level of operating income? what level of sale must be generated to break even? what will happen to Profitability if capacity is expanded?

calculated on a per unit basis, a company's contribution margin ratio equals its __ __ per unit divided by its average unit __ __

contribution margin, sales price

the unit cost savings that result from increasing output by using production facilities more intensively are referred to as

economies of scale

as input units of a particular activity base increase, the difference between the average total cost per unit of that activity base and the average fixed cost per unit of that activity base

equals the variable cost per unit of the activity base, stays the same

depreciation expense, double declining method

fixed

depreciation, straight line

fixed

property tax expense

fixed cost

costs that do not change significantly in response to changes in an activity base are referred to as

fixed costs