Exam 1 and 2 Review

For most businesses, annual straight line depreciation expense on the company's building is what type of cost? -Mixed -Fixed -Variable -Step

Fixed

If production increases by 30%, how will total variable costs likely react? -Increase by 15% -Increase by 30% -Decrease by 30% -Remain the same

Increase by 30%

CVP analysis assumes all of the following except -revenues are linear throughout the relevant range. -change in volume is the only factor that affects costs. -inventory levels will increase. -the mix of products will not change.

Inventory levels will increase

When the number of units produced is less than the number of units sold, how does operating income under variable costing differ from operating income under absorption costing? -It is the same as operating income under absorption costing. -It is higher than operating income under absorption costing. -It is lower than operating income under absorption costing. -It depends upon the amount of decline.

It is higher than operating income under absorption costing

What will be the effect on the contribution margin ratio if the selling price per unit decreases and variable cost per unit remains the same? -It will increase. -It will remain the same. -It will decrease. -It is impossible to determine with the given information.

It will decrease

Using account analysis, what type of cost is an electric bill that charges a flat monthly fee plus a charge for each kilowatt hour of electricity used? -Variable -Step -Mixed

Mixed

How is operating income affected if the number of units sold exceeds the number of units produced? -Operating income would be lower under a variable costing income statement. -Operating income would be higher under an absorption costing income statement. -Operating income would be higher under a variable costing income statement. -Operating income would be the same under both a variable costing and absorption costing income statement.

Operating income would be higher under a variable costing income statement

By multiplying ________ and then subtracting fixed costs, managers can quickly forecast the operating income. -projected sales revenue by the contribution margin ratio -projected sales units by the contribution margin ratio -projected sales units by the variable cost ratio -projected sales revenue by the unit contribution margin

Projected sales revenue by the contribution margin ratio

Managers can quickly forecast the total contribution margin by multiplying the -projected sales revenue by the contribution margin ratio. -projected sales units by the variable cost ratio. -projected sales units by the contribution margin ratio. -projected sales revenue by the unit contribution margin.

Projected sales revenue by the contribution margin ratio

If production increases by 25%, how will total fixed costs likely react? -Decrease by 25% -Increase by 12.5% -Increase by 25% -Remain the same

Remain the same

Using account analysis, what type of cost is the fee the airline company charges for your bags assuming a typical policy is $25 if the bag weighs between 0 and 50 lbs.; $75 if the bag weighs between 50 and 75 lbs. and $125 if the bag weighs between 75 and 100 lbs? -Variable -Step -Fixed -Mixed

Step

Which of the following is a fixed cost? -Direct materials cost -Straight-line depreciation expense -Sales commission expense -Direct labor cost

Straight-line deprecation expense

If a regression analysis shows an R factor of 0.15, it is safe to assume -strong negative relationship between cost and volume. -perfect positive relationship between cost and volume. -very weak relationship between cost and volume. -strong positive relationship between cost and volume.

Very weak relationship between cost and volume

Assuming no other changes in the cost-volume-profit relationship, which of the following will decrease the breakeven point in units? -An increase in total fixed costs -An increase in the variable costs per unit -An increase in the selling price per unit -decrease in the selling price per unit

An increase in the selling price per unit

If both fixed expenses and the selling price per unit increase while variable costs per unit are unchanged, which of the following statements is true? -Breakeven point in units decreases. -Breakeven point in units remains unchanged. -Breakeven point in units increases. -Breakeven point in units could increase, decrease, or remain the same.

Breakeven point in units could increase, decrease or remain the same

If total fixed costs decrease while the selling price per unit and variable costs per unit remain constant, which of the following statements is true? -Breakeven point in units decreases. -Contribution margin increases. -Contribution margin decreases. -Breakeven point in units increases.

Breakeven point in units decreases

If the variable cost per unit increases while the sale price per unit and total fixed costs remain constant, which of the following statements is true? -Breakeven point in units increases. -Breakeven point in units decreases. -Contribution margin ratio increases. -Breakeven point in units remains the same.

Breakeven point in units increases

Fixed costs that are the result of previous management decisions that current managers have no control over in the short run are called ________ fixed costs. -committed -discretionary -past -standard

Committed