BSA24C - CH 1 (CVP) - MCQ

The contribution margin ratio is the a. same as the variable cost ratio b. same as profit c. portion of equity contributed by stockholders d. same as the profit-volume ratio

The contribution margin ratio is the a. same as the variable cost ratio b. same as profit c. portion of equity contributed by stockholders d. same as the profit-volume ratio

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. This is called a. "what if" or sensitivity analysis b. vary the data analysis c. computer-aided analysis d. data gathering

a. "what if" or sensitivity analysis

Cost-volume-profit analysis cannot be used if which of the following occurs? a. Costs cannot be properly classified into fixed and variable costs. b. The total fixed costs change. c. The per-unit variable costs change. d. Per-unit sales prices change

a. Costs cannot be properly classified into fixed and variable costs

. Which of the following is not an assumption underlying cost-volume-profit analysis? a. The break-even point will be passed during the period. b. Total sales and total costs can be represented by straight lines. c. Costs can be accurately divided into fixed and variable components. d. The sales mix is constant

a. The break-even point will be passed during the period.

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would a. decrease b. increase c. remain the same d. increase or decrease, depending on the percentage increase in utility rates

a. decrease

Which of the following describes the behavior of the fixed cost per unit? a. decreases with increasing production b. decreases with decreasing production c. remains constant with changes in production d. increases with increasing production

a. decreases with increasing production

Given the following cost data, what type of cost is shown? Total Cost / Number of Units $8,000 / 1 8,500 / 2 9,000 / 3 9,500 / 4 a. mixed cost b. variable cost c. fixed cost d. period cost

a. mixed cost

Understanding how costs behave is useful to management for all the following reasons except a. predicting customer demand b. predicting profits as sales and production volumes change c. estimating costs d. changing an existing product production

a. predicting customer demand

Most operating decisions of management focus on a narrow range of activity called the a. relevant range of production b. strategic level of production c. optimal level of production d. tactical operating level of production

a. relevant range of production

As production increases, variable costs per unit a. stay the same b. increase c. decrease d. either increase or decrease, depending on the fixed costs

a. stay the same

Contribution margin is a. the excess of sales revenue over variable cost b. another term for volume in the "cost-volume-profit" analysis c. profit d. the same as sales revenue

a. the excess of sales revenue over variable cost

Which of the following conditions would cause the break-even point to increase? a. total fixed costs increase b. unit selling price increases c. unit variable cost decreases d. total fixed costs decrease

a. total fixed costs increase

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit? a. margin of safety ratio b. contribution margin ratio c. costs and expenses ratio d. profit ratio

b. contribution margin ratio

The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed a. contribution margin analysis b. cost-volume-profit analysis c. budgetary analysis d. gross profit analysis

b. cost-volume-profit analysis

As production increases, the fixed cost per unit a. increases b. decreases c. remains the same d. either increases or decreases, depending on the variable

b. decreases

Which of the following is an example of a cost that varies in total as the number of units produced changes? a. salary of a production supervisor b. direct materials cost c. property taxes on factory buildings d. straight-line depreciation on factory equipment

b. direct materials cost

. If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would a. decrease b. increase c. remain the same d. increase or decrease, depending on the percentage increase in wage rates

b. increase

In a cost-volume-profit chart, the a. total cost line begins at zero b. slope of the total cost line is dependent on the fixed cost per unit c. total cost line begins at the total fixed cost value on the vertical axis d. total cost line normally ends at the highest sales value

c. total cost line begins at the total fixed cost value on the vertical axis

Which of the following conditions would cause the break-even point to decrease? a. total fixed costs increase b. unit selling price decreases c. unit variable cost decreases d. unit variable cost increases

c. unit variable cost decreases

Costs that vary in total in direct proportion to changes in an activity level are called a. fixed costs b. sunk costs c. variable costs d. differential costs

c. variable costs

Which of the following conditions would cause the break-even point to increase? a. total fixed costs decrease b. unit selling price increases c. unit variable cost decreases d. unit variable cost increases

d. unit variable cost increases

In cost-volume-profit analysis, all costs are classified into which of the following two categories? a. mixed costs and variable costs b. sunk costs and fixed costs c. discretionary costs and sunk costs d. variable costs and fixed costs

d. variable costs and fixed costs

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs? Variable Costs / Fixed Costs / Mixed Costs a. increase increase increase b. increase no change increase c. no change no change increase d. decrease increase increase

b. increase no change increase

When units manufactured exceed units sold, variable costing income a. equals absorption costing income b. is less than absorption costing income c. is greater than absorption costing income d. is greater by the number of units produced multiplied by the variable cost ratio

b. is less than absorption costing income

The difference between the current sales revenue and the sales at the break-even point is called the a. contribution margin b. margin of safety c. price factor d. operating leverage

b. margin of safety

A cost that has characteristics of both a variable cost and a fixed cost is called a a. variable/fixed cost b. mixed cost c. discretionary cost d. sunk cost

b. mixed cost

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes? a. direct labor b. salary of a factory supervisor c. units-of-production depreciation on factory equipment d. direct materials

b. salary of a factory supervisor

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service? a. number of truck drivers b. total miles driven c. number of trucks in service d. number of packages picked up

b. total miles driven

Given the following cost data, what type of cost is shown? Total Cost / Number of Units $20 / 1 40 / 2 60 / 3 80 / 4 a. mixed cost b. variable cost c. fixed cost d. period cost

b. variable cost

Which of the following statements is true regarding fixed and variable costs? a. Both costs are constant when considered on a per-unit basis. b. Both costs are constant when considered on a total basis. c. Fixed costs are constant in total, and variable costs are constant per unit. d. Variable costs are constant in total, and fixed costs vary in total.

c. Fixed costs are constant in total, and variable costs are constant per unit.

Charlotte Co. has budgeted salary increases to factory supervisors totaling 9%. If selling prices and all other cost relationships are held constant, next year's break-even point a. will decrease by 9% b. will increase by 9% c. cannot be determined from the data given d. will increase at a rate greater than 9%

c. cannot be determined from the data given

Given the following cost data, what type of cost is shown? Cost per Unit / Number of Units $6,000 / 1 3,000 / 2 2,000 / 3 1,500 / 4 a. mixed cost b. variable cost c. fixed cost d. period cost

c. fixed cost

Which of the following is not an example of a cost that varies in total as the number of units produced changes? a. electricity per KWH to operate factory equipment b. direct materials cost c. insurance premiums on factory building d. wages of assembly worker

c. insurance premiums on factory building

Which of the following activity bases would be the most appropriate for food costs of a hospital? a. number of nurses scheduled to work b. number of MRIs taken c. number of patients who stay in the hospital d. quantity of prescriptions filled

c. number of patients who stay in the hospital

Which of the following describes the behavior of a variable cost per unit? a. varies in increasing proportion with changes in the activity level b. varies in decreasing proportion with changes in the activity level c. remains constant with changes in the activity level d. varies in direct proportion with the activity level

c. remains constant with changes in the activity level

Which of the following costs is a mixed cost? a. salary of a factory supervisor b. electricity costs of $3 per kilowatt-hour c. rental costs of $10,000 per month plus $0.30 per machine hour of use d. straight-line depreciation on factory equipment

c. rental costs of $10,000 per month plus $0.30 per machine hour of use

The relative distribution of sales among the various products sold by a business is the a. business's basket of goods b. contribution margin mix c. sales mix d. product portfolio

c. sales mix

The graph of a variable cost when plotted against its related activity base appears as a a. circle b. rectangle c. straight line d. curved line

c. straight line

Which of the following is not an example of a cost that varies in total as the number of units produced changes? a. electricity per KWH to operate factory equipment b. direct materials cost c. straight-line depreciation on factory equipment d. wages of assembly worker

c. straight-line depreciation on factory equipment

For purposes of analysis, mixed costs are a. classified as fixed costs b. classified as variable costs c. classified as period costs d. separated into their variable and fixed cost components

d. separated into their variable and fixed cost components

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed a. two b. three c. fifteen d. There is no limit.

d. There is no limit.

The point where the profit line intersects the horizontal axis on the profit-volume chart represents the a. maximum possible operating loss b. maximum possible operating income c. total fixed costs d. break-even point

d. break-even point

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents the a. maximum possible operating loss b. maximum possible operating income c. total fixed costs d. break-even point

d. break-even point

If fixed costs increased and variable costs per unit decreased, the break-even point a. would increase b. would decrease c. would remain the same d. cannot be determined from the data provided

d. cannot be determined from the data provided