ACCT 245 2022 FALL QUARTER EXAM PREP
Calculating the predetermined overhead rate is the Blank______ step in assigning manufacturing overhead costs.
Second
Which of the following may not represent the general trend in the data?
The high-low method
A fixed cost, such as a long-term lease, that is difficult for a manager to change in the short-run is called a(n) Blank______ fixed cost. Multiple choice question.
committed
After fixed costs have been covered, becomes net operating income.
contribution margin
Sales revenue minus variable costs equals
contribution margin
The amount each unit sold contributes towards fixed costs and profit is the unit
contribution margin
The financial statement that organizes costs by their behavior instead of by their function is the
contribution margin income statement
The contribution margin stated as a percentage of sales dollars is the
contribution margin ratio
The extent to which a company uses fixed costs (as opposed to variable costs) in its operations is called
cost structure
Period Costs
costs that are taken directly to the income statement as expenses in the period in which they are incurred or accrued
indirect costs
costs that are the result of a firm's general operations and are not directly tied to any specific cost object
Contribution margin
covers fixed cost and profit
Identifying the decision problem is the Blank______ step in the decision-making process.
first
In a least-squares regression line, the vertical intercept (a) of the line represents the total blank cost
fixed cost
A degree of operating leverage greater than one means that managers are using Blank______ to create operating leverage. Multiple choice question.
fixed costs
The contribution margin goes first to cover
fixed costs
When constructing a CVP graph, the place where the total cost line intercepts the y-axis represents total
fixed costs
Variable costing
focuses on contribution margin instead of gross margin
When planning a 5-day trip and making a decision to drive or take the train, the cost of boarding your dog while you are away is a(n)
irrelevant cost
Determining decision alternatives
is a critical step in the decision-making process
Determining decision alternatives ______.
is a critical step in the decision-making process
Reviewing the results of a decision
is an important final step in decision making
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
The process of making a decision
is basically the same for all decisions
Multi-product target profit analysis
is calculated the same way as single product analysis depends upon the sales mix
The high-low method
is easy to apply may produce inaccurate results
R-squared
is usually provided by least-squares regression software. measures goodness of fit
Fixed costs should not be expressed on a per-unit basis because
it may make managers believe they can reduce costs by producing more
A statistical technique for finding the best fitting line based on historical data is
least squares regression
A statistical technique for finding the best fitting line based on historical data is called
least squares regression
The best fitting line minimizes the sum of the squared errors when using
least-square regression
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 Blank______, proper interpretation of the results is critical.
least-squares regression
The assumption that the relationship between total cost and activity can be approximated by a straight line is called the
linear
Differences in profit between absorption and variable costing can occur in
manufacturing companies only
Labor costs:
may be direct or indirect are recorded in basically the same way as material costs
Incremental analysis
may be referred to as relevant costing is also called differential analysis
R-squared
measures goodness of fit is usually provided by least-squares regression software.
When inventory decreases, cost of goods sold under absorption costing will be
more than
When inventory decreases, the cost of goods sold under absorption costing will be the blank cost of goods sold under variable costing.
more than
Nonmanufacturing costs are
never reported as inventory
It fixed costs are zero, the degree of operating level will be
one Reason: If fixed costs are zero, the degree of operating leverage (DOL) will be exactly one, meaning there is a one-to-one relationship between contribution margin and net income.
The high-low method
only uses two data points 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
When evaluating a make-or-buy decision, managers should consider
opportunity costs all variable production costs
The weighted average unit contribution margin is the average unit contribution margin of multiple products weighted according to
percentage of units sold
A useful first step in analyzing cost behavior is
preparing a scattergraph
According to the assumptions of CVP, Blank______ will not change as the volume of a product increases or decreases.
price
The unit contribution margin
tells how much each additional unit contributes to profit
cost flow
the assumed assignment of costs to goods sold and to ending inventory
The single point where the total revenue line crosses the total expense line on the CVP graph indicates
the break-even point profit equals zero
A simple approach that uses the two most extreme activity observations is the
the high-low method
Goodstone Tire Corporation sells tires for $90 each. Per-unit costs associated with producing and selling the tires are: Direct materials $35, Direct labor $10, Factory overhead $20. The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming that Goodstone has no excess capacity,
the loss from accepting the special order will be $25,000 Reason: The total revenue of the special order is $65,000 and the cost is $53,000 (direct materials, direct labor, variable overhead) for a contribution margin of $12,000. The opportunity cost of lost sales is $37,000 (($90 regular cost - $53 of variable cost) × 1,000) for an overall loss of $25,000.
It is important to review the results of decisions because
there are likely to be unexpected costs and benefits corrective action may be needed feedback is an important component of managerial accounting
Differences in net operating income between absorption costing and variable costing are due to the
timing of when fixed manufacturing overhead is expensed
The distance between the total revenue line and the total cost line a on a cost-volume-profit graph represents the
total amount of either profit or loss
In the equation Y= a + bX, Y is the
total cost
At the break-even point,
total revenue equals total cost profit is zero
The weighted-average contribution margin ratio is calculated using the
total sales mix
Job Costing vs. Process Costing
trace to specific job/product vs average over a batch
direct labor cost
The wages of factory workers who are directly involved in converting materials into a finished product.
When materials are issued into production,
direct materials are recorded on the job cost sheet direct materials are recorded in Work in Process
Costs are transferred from raw materials inventory to
either work in process or manufacturing overhead
The break-even point is reached when total revenue is Blank______ total costs.
equal to
Absorption costing and variable costing net operating income will be
equal when the number of units produced equals the number of units sold equal when there is no beginning and no ending inventory
Opportunity costs are
only relevant at full capacity
How much of the variability of y is explained by x is identified by
r-squared
How much contribution margin is generated per dollar of sales revenue is the contribution margin
ratio
Inventory Flow
raw materials, work in process, finished goods
For internal decision-making, it is best to use
variable costing
CVP analysis can be useful in deciding
what investments to make which services to offer which products to offer
The goal of break-even analysis is to find the level of sales where profit is equal to
zero
The Quaint Quilt produces and sells handmade quilts. Variable manufacturing costs total $140 per quilt. Fixed manufacturing overhead totals $68,250 per quarter. Variable selling and administrative costs are $19 per quilt sold, and fixed selling and administrative costs are $50,000 per quarter. Last quarter, the company produced 910 quilts and sold 780 quilts. The total variable cost reported on Quaint Quilt's variable costing income statement is
$124,020
Given the following information, calculate the unit product cost under absorption costing.
$155
A company has a contribution margin ratio of 40%. The president believes that spending $1,500 to advertise its product will increase sales by $10,000. How much will net income increase if the president is correct?
$2,500
Cakes by Jacki has $144,000 of fixed costs per year. The contribution margin ratio is 59%. The sales dollars to break-even rounded to the nearest dollar equals
$244,068 Reason: $144,000 ÷ 0.59 = $244,068
JVL Inc. sells its only product for $10 per unit. Variable costs are $4 per unit and total fixed costs are $40,000. The company is currently selling 10,000 units per year. By how much will profits increase if sales increase 1,500 units?
$9,000
The Greenery sells three products with a weighted-average contribution margin ratio of 51.5%. Given total fixed costs of $42,830 and a target profit of $20,000 per month, target sales equals $
122000 per month
Desks by Daisy sells a student desk for $100 per unit. The variable cost per desk is $40 and Daisy's fixed costs of producing the desks equals $15,000 per month. Daisy needs to sell
250 desks per month in order to break-even.
Given net operating income of $50,000, contribution margin of $150,000 and sales of $300,000, the degree of operating leverage of
3
Given: Calculated variable cost per unit of $1.40 High level of activity: 2,500 units and $5,300 total cost The low level of activity was 1,000 units. Total cost at the low level of activity equals
3200 Reason: $5,300 - ($1.40 × 2,500) = $1,800 of fixed costs. $1,800 + (1,000 x $1.40) = $3,200 of total cost at the low level of activity.
Baker's contribution margin ratio is 60%, which means that a $7,000 increase in sales will result in a $
4200
A company sells 15,000 units of product per month. The sales price per unit is $5.00, variable costs are $2.80 per unit and and total fixed costs equal $3,000. The contribution margin ratio is
44% Reason: ($5.00 - $2.80) ÷ $5.00 = 44%
Webster, LLC sells its product for $20 per unit. Variable costs are $11 per unit and total fixed costs are $35,000. The company sells 8,000 units per year. Webster's contribution margin ratio is
45
A company sells its product for $40 per unit. Variable costs are $12 per unit. Total fixed costs are $50,000. In order to reach the profit goal of $90,000 the company must sell
5000
Given sales of 10,000 units per month, sales price per unit of $4.00, variable costs of $1.80 per unit and and total fixed costs of $5,000, the contribution margin ratio is
55
True or false: Incremental analysis is a decision-making approach that compares the relevant costs and benefits of decision alternatives.
True Reason: With incremental analysis you isolate the information that is relevant to the decision.
The format used to prepare a contribution income statement is Sales -
Variable expenses = Contribution margin - Fixed expenses = Net income
Which of the following is NOT a qualitative question to ask when in a make-or-buy decision?
What is the cost difference between the two alternatives?
Job Order Costing
a costing system used in situations where many different products, jobs, or services are produced each period
The linearity assumption states
a straight line approximates the relationship between cost and activity
The linearity assumption states Blank______.
a straight line approximates the relationship between cost and activity
Activity-based costing (ABC)
a technique to assign product costs based on links between activities that drive costs and the production of specific products
Managers sometimes have an incentive to overproduce when using full
absorption
When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity, choose the periods with the highest and lowest
activity
The best "goodness of fit" measure for evaluating regression models with more than one independent (X) variable is
adjusted r
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
Contribution margin equals sales minus
all variable costs variable manufacturing costs variable selling and administrative costs
The difference between break-even analysis and target profit analysis is the
amount that profit is set to
To prepare a CVP graph, lines must be drawn representing total revenue,
and total cost
To prepare a CVP graph, lines must be drawn representing total revenue, Blank______.
and total cost
Relevant costs
are also called differential costs occur in the future differ between alternatives
Step-fixed costs
are fixed over a fairly wide range of activity
A cost that can be eliminated in whole or in part by choosing one alternative over another is a(n)
avoidable cost
How total costs changes as some level of activity changes is called cost______.
behavior
Opportunity cost is the
benefit you give up when you choose one thing over another
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
When making a decision, Blank______ should be considered. Multiple choice question.
both quantitative and qualitative data
The formula to calculate the variable cost per unit using the high-low method is
difference in total cost divided by difference in activity
Given the following, determine if a buy price of $4.00 per unit for 3,000 units should be accepted. Total variable production costs of making the units equal $11,100, and total production fixed costs are $3,500. Of the fixed costs, $1,500 is avoidable if the units are purchased. Based on price, the company should (make/buy)
buy the units at a total net benefit of $600
CVP
can be used for "what-if" analysis allows managers to see how changing one variable can impact another can be used to make many different decisions
Goodstone Tire Corporation sells tires for $90 each. Per-unit costs associated with producing and selling the tires are: Direct materials $35; Direct labor $10; Factory overhead $20. The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming that Goodstone has excess capacity,
the incremental profit from the special order will be $12,000 Reason: The revenue per tire is $65 and the cost is $53 (direct materials, direct labor, variable overhead), so each tire will generate $12 in incremental profit or $12,000 total.
When the number of units produced equals the number of units sold, net income will be
the same under both absorption costing and variable costing
When using the high low method, the difference in cost divided by the difference in activity is
the variable cost per unit
Nonmanufacturing costs are reported as inventory when using full absorption costing.
False
True or false: The cost of each individual unit is tracked to products under both job order and process costing.
False Reason: Because each unit is the same, there is no reason to track the costs of each unit individually under process costing.
At the indifference point, both options under consideration will have the same break-even point.
False Reason: Because of cost structure, the break-even points can differ.
True or false: When making a decision, only quantitative factors should be considered.
False Reason: Both quantitative and qualitative factors should be considered.
True or false: CVP analysis is only used for break-even and target profit analysis.
False Reason: CVP analysis can be used for a variety of different managerial decisions.
True or false: Cost structure refers to how a company uses product and period costs in an organization.
False Reason: Cost structure refers to how a company uses fixed and variable costs in an organization.
True or false: When computing target sales using the weighted-average contribution margin ratio, the ratio is computed according to the product mix.
False Reason: The ratio is computed according to the sales mix, not the product mix.
JVL Enterprises has set a target profit of $126,000. The company sells a single product for $50 per unit. Variable costs are $15 per unit and fixed costs total $98,000. How many units does JVL have to sell to BREAK EVEN?
$98,000 ÷ ($50 - $15) = 2,800
Paula's Perfumes has a target profit of $4,000 per month. Perfume sells for $15.00 per bottle and variable costs are $13.50 per bottle. Fixed costs are $3,200 per month. The number of bottles that must be sold each month to earn the target profit is
($4,000 + $3,200) ÷ ($15.00 - $13.50) = 4,800 bottles.
Run Like the Wind sells ceiling fans. Target profit for the year is $470,000. If each fan's contribution margin is $32 and fixed costs total $222,640, the number of fans that must be sold to meet the company's goal is
($470,000 + $222,640) ÷ $32 = 21,645 fans
A company has fixed costs of $564,000 and wishes to earn a profit of $800,000 this year. If Company A has a contribution margin ratio of 62%, sales dollars needed to reach the target profit equals
($564,000 + $800,000) ÷ 0.62 = $2,200,000
The formula used to calculate the sales volume needed to achieve a target profit is
(Target profit + Fixed expenses) ÷ Unit contribution margin
Given fixed costs of $30,000, variable costs of $2.00 per unit, and a contribution margin of $5.00 unit,
6000 units
A company has fixed costs of $25,000 and a weighted average unit contribution margin of $25. Of the sales, 65% are Product XYZ and 35% are Product TDW. In order to break even the company must sell units of Product XYZ and units of Product TDW.
650 350
A company sells two products. Product A sales total $28,000 and Product B sales total $12,000. Total contribution margin is $18,000 for Product A and $9,000 for Product B. The weighted average contribution margin ratio is
67.5
Pearls, Pearls, Pearls! manufactures and sells jewelry. The total variable cost of goods sold this month is $72,490. Variable selling and administrative cost is $22 per unit sold. If 350 units are produced and 314 units are sold this month, the total variable cost reported on the income statement for the month is $
79398
Tess's Tidbits sells three different snack packs. The weighted average contribution margin is $15.00 and total fixed costs are $20,000 per month. Of her total sales, 40% are for the deluxe snack pack, 35% are standard snack packs and 25% are mini snack packs. In order to earn the target profit of $10,000 per month, Tess needs to sell deluxe snack packs each month.
800
Given total fixed costs of $35,000 and a contribution margin ratio of 40%, $
87500 of revenue must be earned to break even.
Larson's Ltd. sells its product for $12.00 per unit. The contribution margin per unit is $8.00 and fixed costs are $75,000. Larson has to sell to
9,375 units to break even
Comfy Cozy Chairs makes and sells rockers. Each rocker requires $45 of direct materials and $37 of direct labor. Variable manufacturing overhead is $8 per unit, and fixed manufacturing overhead totals $58,000. Variable selling and administrative costs equal $15 per unit, and fixed selling and administrative costs total $102,000. During the period, 2,000 rockers were produced and 1,640 were sold. The unit product cost using variable costing is
90
A company is currently selling 10,000 units of product for $40 per unit. The unit contribution margin is $27 and fixed costs are $174,000. The company believes that spending $30,000 on advertising will allow them to increase the selling price to $45. If these changes are made, how many units will have to be sold to earn $100,000 per year?
9500
Process Costing
A costing method used when essentially homogeneous products are produced on a continuous basis
Which of the following statements are true?
Adjusted R² should be considered when using multiple regression. Simple regression is preferred to high-low.
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
Stephens Co. can purchase 20,000 units of Part XYZ from a supplier for $18 per part. Stephens's per-unit manufacturing costs for 20,000 units are: Variable manufacturing cost $12 $240,000 Supervisor salary $3 $60,000 Depreciation $1 $20,000 Allocated fixed overhead $7 $140,000 If the part is purchased, the supervisor will be eliminated. The special equipment used to manufacture Part XYZ has no other use and no salvage value. Total allocated fixed overhead will be the same regardless of the decision. Should the company buy the part or continue to make it?
Continue to make—$60,000 advantage
Degree of operating leverage equals
Contribution margin ÷ Net operating income
Step Costs
Costs that are fixed over some range of activity and then increase in a step-like fashion when a capacity limit is reached.
Companies choose to use predetermined overhead rates based on estimates in order to make costing products easier.
False, Reason: Managers often do not know the actual manufacturing overhead cost until after the month, quarter, or year has ended, too late to make decisions and cost products.
When a job is completed, its costs are transferred into:
Finished Goods and not Cost of Goods Sold Reason: Cost are transferred to Cost of Goods Sold when a job is sold, not when it is completed.
Lilly's Lilacs sells two different potted plants - A and B. The weighted average per unit contribution margin is $30 and Lily's fixed costs are $24,000. The sales mix is 60% - A and 40% - B. Which of the following statements are true?
If Lily sells 480 units of both A and B she will have a net profit. Lily must sell a total of 800 plants to break-even.
Which of the following are assumptions of cost volume profit analysis?
In multi-product companies, the sales mix is constant. All costs can be classified as either fixed or variable. Production volume is equal to sales volume.
What name is given to a record of all costs that relate to a particular job?
Job cost sheet
The forgone benefit of choosing one decision alternative over another is its
Opportunity cost
How much of the variability of y is explained by x is identified by
R-squared
A company sells two products. Product A sells for $10.00 per unit and Product B sells for $8.00 per unit. Variable costs are $3.00 for Product A and $2.50 for Product B. If the sales mix is 70% Product A and 30% Product B, the weighted average contribution margin is
Reason: $7.00 × 70% + $5.50 × 30% = $6.55
Given sales of $110,000, a contribution margin of $75,000 and net operating income of $30,000, operating leverage is
Reason: $75,000 ÷ $30,000 = 2.5
The Greenery sells three products. Product A has a contribution margin of $10 per unit, Product B has a contribution margin of $15 per unit and Product C has a contribution margin of $12 per unit. Sales are: 25% A, 35% B and 40% C. The weighted average unit contribution for The Greenery is
Reason: ($10 × 25% + $15 × 35% + $12 × 40%) = $12.55
Sniffles, Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,400. To achieve a target profit of $930,000, Sniffles' sales rounded to the nearest dollar must be
Reason: ($240,400 + $930,000) ÷ 0.77= $1,520,000.
If sales increase by 5% and the degree of operating leverage is 4, net operating income should increase by
Reason: 5% × 4 = 20%.
Tasty Tangerine is currently selling 50,000 boxes for $25 per box. Variable cost per box is $17 and fixed costs total $260,000. A plan is being considered to increase advertising which will increase fixed costs by $60,000. Management believes the advertising along with a $2 reduction in the selling price per box will increase sales volume by 24,000 boxes. If management's predictions are correct, making these changes will cause net income for the year to
Reason: If the change is implemented, total contribution margin would increase by $44,000 ((74,000 boxes × $6) - (50,000 boxes × $8)). Additional contribution margin of $44,000 - $60,000 in new fixed costs = a net operating income decrease of $16,000.
Jacki's Jewels sells 10,000 necklace & earring sets per year. Fixed costs are $80,000 and variable costs are $20 per set. Jacki is planning to increase the quality of the stones, which will increase variable costs by $8 per set and increase sales by 25%. If Jacki increases the quality of the stones, what price will she need to charge to attain her target profit of $60,000 per year?
Reason: Costs + Target Profit = ($28 x 12,500 + $80,000 + $60,000) = $490,000 ÷ 12,500 sales in units or $39.20 per set.
Sweet Dreams sells 15,000 pillows per year for $25 per unit. Variable cost per unit is $14. Sweet Dreams wants to improve customer satisfaction by using higher quality direct materials which will increase the variable cost per unit to $19. Fixed costs per year total $90,000. If sales increase by 5,000 units per year, what price will Sweet Dreams have to charge to earn the same profit it is earning now ($75,000 per year)?
Reason: Costs + Target Profit: ($19 × 20,000 + $90,000 + $75,000) = $545,000 ÷ 20,000 units = $27.25
Which of the following is not a method used to estimate the fixed and variable portions of mixed costs?
Relevant range analysis
direct material cost
The cost of all materials and parts that are directly traced to items produced
Which of the following statements are true?
The equation for a straight line can be used to express the relationship between mixed costs and the level of activity. 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.
Which of the following is NOT a qualitative factor to consider in a make-or-buy decision?
The variable production costs of the product.
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.
The equation for the profit equation method is
Total Sales Revenue - Total Variable Costs - Total Fixed Costs = Profit
A measure of the limit placed on a specific resource is known as its
capacity
The number of customers who can be seated in an auditorium is a measure of the facility's
capacity
Mixed costs
change both in total and per unit as activity changes
Full absorption costing can have a different bottom line (profit) than variable costing because of
changes in inventory levels
When using the high-low method, if the high or low levels of cost do not match the high or low levels of activity,
choose the periods with the highest and lowest levels of activity and their associated costs
Once you have identified a problem, the next step is to determine the possible solutions, which are called
decision alternatives
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
Net operating income is less under absorption costing than under variable costing when inventory for the period
decreases
An increase in sales will increase net operating income by a multiple of that increase in sales. The multiple is known as the
degree of operating leverage
When a company has more than enough resources to satisfy demand it is operating with
excess capacity
When the total amount of the cost will be the same regardless of the alternatives selected in a decision, the cost should be Blank______ when doing decision analysis.
excluded
When there is excess capacity, an analysis of a special order
excludes fixed costs
A variable costing income statement
focuses on fixed and variable expenses, while an absorption costing income statement focuses on period and product costs calculates contribution margin, while the absorption costing income statement calculates gross margin
Managers may have an incentive to overproduce in order to increase profits when using
full absorption
Fixed costs
generally include rent and supervisor salaries can change over time but are not based on some measure of activity remain constant in total within the relevant range of activity
An absorption costing income statement calculates
gross margin by deducting cost of goods sold from sales
If operating leverage is high, a small percentage increase in sales produces a(n) Blank______ percentage increase in net operating income than if operating leverage is low.
higher
Net operating income under absorption costing is generally Blank______ net operating income under variable costing in periods in which inventory increases. Multiple choice question.
higher than
When units produced exceed units sold, net income will generally be
higher under absorption costing than under variable costing
CVP analysis can help answer the question of
how net income can be increased
When a company is operating at full capacity, a special-order analysis
includes the opportunity cost of lost sales
Comparing the relevant costs and benefits of alternative decision choices is called
incremental analysis
Setting two profit equations so that they yield the same profit allows managers to calculate the
indifference point
In the equation Y = a + bX, a denotes the
intercept, total fixed cost
When making a decision to drive or take the train on a trip, the cost of the train ticket is a(n)
relevant cost
Costs and benefits that differ between alternatives are called
relevant costs and benefits.
Variable costs Blank______.
remain constant per unit and vary in total
When preparing a multi-product break-even analysis, the assumption is ordinarily made that the Blank______ will not change.
sales mix
The break-even point can be affected by
sales mix product mix total fixed costs
In the profit equation, total Blank______ is a function of the number of units sold (Q).
sales revenue variable costs
Contribution margin is
sales revenue minus variable costs
A visual representation of the relationship between cost and activity is provided by a(n)
scattergraph
A limitation of Blank______ is that it is (they are) subjective and inexact.
scattergraphs
A contribution margin income statement
separates costs into their fixed and variable components can assist with management decision making
An analysis of a special order
should consider if excess capacity exists should consider the impact on regular customers
Costs that have a fairly narrow range and rise in multiple steps across the relevant range are called ___ - ___ costs.
step variable
Costs that have already been incurred and cannot be avoided regardless of what a manager decides to do are
sunk cost
An extension of break-even analysis that allows managers to determine units or sales needed to achieve an earning's goal is called
target profit
True or false: Qualitative factors should be considered in special-order decisions.
true
True or false: When using the high-low method, fixed costs are calculated after variable costs are determined.
true
When a company has no inventory and units produced equals units sold, all fixed overhead costs are reported on the income statement under both absorption costing and variable costing.
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 high-low method
uses only two data points is based on the two most extreme periods of activity
For internal decision making, it is best to use Blank______ costing.
variable
The slope of the regression line represents the Blank______ cost per unit of activity.
variable
When preparing a CVP graph, the slope of the total cost line represents
variable cost per unit
