Managerial Accounting, 4e (Whitecotton) Chapter 5 Cost Behavior true or false

A fixed cost will stay constant on a per unit basis as the volume increases.

FALSE

Contribution margin plus variable cost per unit equals total sales revenue.

FALSE

Firms may choose to use absorption costing or variable costing for external financial reporting purposes.

FALSE

Full absorption costing divides fixed overhead between Cost of Goods Sold and period expenses.

FALSE

R-square tells managers how much of the variability in activity is caused by variability in cost.

FALSE

Step costs are fixed over some range of activity and then increase like a variable cost.

FALSE

The contribution margin income statement is appropriate for external users.

FALSE

The high-low method requires three observations of costs to calculate the cost formula.

FALSE

The unit contribution margin tells how much each additional unit sold will contribute to covering variable costs.

FALSE

A scattergraph is useful in recognizing unusual patterns in the cost data.

TRUE

A variable cost increases in total as the volume increases.

TRUE

Contribution margin is defined as sales revenue less variable costs.

TRUE

The contribution margin ratio is calculated as total contribution margin divided by total sales revenue.

TRUE

The least-squares regression method uses all of the available data to find the best fitting line.

TRUE

Variable costing uses a contribution margin income statement.

TRUE