ACC 202

Manufacturing cost per unit will be higher under variable costing than under absorption costing.

False

Operating leverage refers to the extent to which a company's net income reacts to a given change in fixed costs.

False

Sales mix is not important to managers when different products have substantially different contribution margins.

False

The use of absorption costing facilitates cost-volume-profit analysis.

False

Variable costing is the approach used for external reporting under generally accepted accounting principles.

False

The margin of safety ratio

indicates what percent decline in sales could be sustained before the company would operate at a loss.

Sales mix is

the relative percentage in which a company sells its multiple products.

Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using

variable costing.

Sprinkle Co. sells its product for $20 per unit. During 2013, it produced 60,000 units and sold 50,000 units. Costs per unit are: - direct materials $5, - direct labor $3, - variable overhead $1. Total Fixed costs are: - $240,000 manufacturing overhead, - $30,000 selling and administrative expenses. The per unit manufacturing cost under absorption costing is

$13

For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the contribution margin per unit is $80. What is the margin of safety in dollars?

$300,000

For Buffalo Co., at a sales level of 5,000 units, sales are $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit?

$5.00

Sprinkle Co. sells its product for $20 per unit. During 2013, it produced 60,000 units and sold 50,000 units. Costs per unit are: - direct materials $5, - direct labor $3, - variable overhead $1. Total Fixed costs are: - $240,000 manufacturing overhead, - $30,000 selling and administrative expenses. The per unit manufacturing cost under variable costing is

$9

For Sanborn Co., sales is $1,000,000, fixed expenses are $300,000, and the contribution margin per unit is $48. What is the break-even point?

6,250 units

Mercantile Corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed costs of $750,000. Mercantile's degree of operating leverage is

6.00

Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.

True

Selling and administrative costs are period costs under both absorption and variable costing.

True

The CVP income statement classifies costs as variable or fixed and computes a contribution margin.

True

The margin of safety tells a company how far sales can drop before it will be operating at a loss.

True

When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using

absorption costing.

The contribution margin ratio is

contribution margin divided by sales.

A shift from low-margin sales to high-margin sales

may increase net income, even though there is a decline in total units sold.

A cost structure which relies more heavily on fixed costs makes the company

more sensitive to changes in sales revenue.

Outsourcing production will

reduce fixed costs and increase variable costs.

Reducing reliance on human workers and instead investing heavily in computers and online technology will

reduce variable costs and increase fixed costs.

Cost structure

refers to the relative proportion of fixed versus variable costs that a company incurs.