Accounting test 3

Which cost decreases the most on a per unit basis as activity increases?

Fixed

The Total Variable costs are those costs with ________

Increase or decrease as sales volume increases or decreases

In February, the total fixed costs at Doster Hotel was $35,000. With 4,500 rooms sold in February, the average fixed cost per room sold was $7.50. The forecast for March projects an 8% increase in occupancy over February. If the increase in sales volume occurs, the total fixed costs for March would be:

Relatively the same as in February

Which is an example of a non controllable cost?

Rent

Which of the following is not a common assumption in cost-volume-profit analysis?

Revenues vary indirectly with variable costs

A good understanding of breakeven analysis is very helpful in understanding CVP analysis

True

A joint cost is a cost that is shared by two or more departments

True

A standard cost is what the cost should be for a given level of sales revenue

True

A variable cost is one that varies in linear fashion with revenue.

True

Breakeven point is the level of sales volume at which total revenue equals total costs

True

Which of the following type of lease options should be used if the sales are less than the indifferent point?

Variable

As occupancy decreases, hotel managers should generally expect:

a decrease in total variable costs

Which of the following is not a fixed cost?

operating supplies

If the analysis of purchasing alternatives, the indifferent point identifies:

the level of business activity at which costs are the same for each alternative.

All of the following are valid assumptions regarding CVP analysis except one. Which of the following assumptions is not a valid assumption?

CVP analysis is limited only to individuals situations for departments and should not be used for decisions regarding the overall organization

The difference between the selling price and variable cost per unit is often called

Contribution margin

Which of the following types of costs are managers expected to keep within predefined boundaries or limits?

Controllable costs

The process of distributing overhead costs among profit centers is called:

Cost allocation

Which of the following tools would a hospitality manager use to establish prices that would generate a specific profit within a defined span of time

Cost- volume-profit-analysis

A fixed cost is one that never changes, even in the long run

False

A loss from operations cannot be analyzed using the CVP method

False

An opportunity cost is one that is recorded on the income statement

False

Decisions made as a result of CVP analysis are guaranteed to be the correct ones.

False

If fixed costs increases with no change in variable costs and selling prices, operating income or net income is expected to increase

False

In CVP analysis, you must always round the number of guests down to the nearest whole number

False

One should never sell below total cost

False

At a restaurant, the total variable cost for May were $16,000. With 4,000 meals sold, the average variable cost per meal sold was $4. For June, the manager expects to sell 10% more meals than in May. If the increase in sales volume occurs, the manager should expect that the total variable costs for June would be:

Higher than in May

A direct expense is

The responsibility of, and controllable by, a department head

The current cost of food sold at the Wharf Restaurant is 35% of sales. If sales increase, the restaurant manager should generally expect an increase in:

The total cost of food sold

Contribution margin is defined as the amount that contributes to covering fixed costs and providing for a profit

True

Indirect costs are also called overhead costs

True