ACCOUNTING 3 EXAM

Gardenia Corp. has a selling price of $15, fixed costs of $25,000, and contribution margin of$65,000. If Gardenia sells 13,000 units, how much are variable costs per unit?

$10.00

When Greenway, Inc. sells 48,000 units, its total fixed cost is $115,200. What is its totalfixed cost when it sells 54,000 units?

$115,200

When Carter, Inc. sells 48,000 units, its total variable cost is $115,200. What is its total variable costwhen it sells 54,000 units?

$129,600

Ajax uses the high-low method of estimating costs. Ajax had total costs of $50,000 at itslowest level of activity, when 5,000 units were sold. When, at its highest level of activity, salesequaled 12,000 units, total costs were $78,000. Ajax would estimate fixed costs as:

$30,000

Georgia uses the high-low method of estimating costs. Georgia had total costs of $50,000 atits lowest level of activity, when 5,000 units were sold. When, at its highest level of activity,sales equaled 10,000 units, total costs were $78,000. Georgia would estimate variable cost per unit as:

$5.60

Orchid Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of$25,000. If Orchid sells 13,000 units, contribution margin will equal:

$65,000

Jasmine Corp. has a selling price of $15, variable costs of $10 per unit, and fixed costs of$25,000. Contribution margin is $85,000. How many units did Jasmine sell?

17,000

Which of the following is a variable cost?

A cost that is $26,000 when production is 65,000, and $36,400 when production is 91,000.

Which of the following is a fixed cost?

A cost that is $28.00 per unit when production is 70,000, and $17.50 per unit whenproduction is 112,000.

The per-unit amount of three different production costs for Thunderbird, Inc., are as follows: see #24 What type of cost is each?

Cost A is fixed, Cost B is mixed, Cost C is variable.

Onini, Inc. produces one product with two production levels: 20,000 units and 80,000 units.At each production level, Onini's per-unit costs for Costs A, B, and C are: see table for #11 What type of cost is each?

Cost A is variable, Cost B is mixed, and Cost C is fixed.

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

False

On a CVP graph, the break-even point is the point at which the contribution margin linecrosses the total cost line

False

Which of the following statements is correct about relevant range?

The relevant range helps managers make decisions based on normal operations, but therelevant range is not prescriptive beyond the range

Which of the following is the correct equation for total mixed costs under the linearity assumption?

Total Fixed Costs + (Variable Cost per Unit × Units of Activity)

A variable cost increases in total as the volume increases

True

Contribution margin is equal to fixed costs at the break-even point

True

Cost-volume-profit analysis assumes that all costs can be accurately described as either fixedor variable.

True

If a scattergraph contains points that do not fall in a perfect line

a straight line can still be used to approximate the relationship if a general linear trend can bediscerned

Total contribution margin is equal to:

fixed costs plus net operating income

All else being equal, if sales revenue doubles, variable costs will:

increase in total

A cost driver:

is an activity that causes total costs to change

A step cost:

is fixed over some range of activity.

The high-low method is a cost estimating approach that uses ________ to find the cost line

only two data points

A graph that provides a visual representation of the relationship between total cost andactivity level is called a:

scattergraph

The linearity assumption is:

the assumption that the relationship between total cost and activity can be approximated by astraight line

The high-low method provides a reasonable estimate of the fixed and variable costs as long as:

the high and low points reflect the general trend of the data

The relevant range is:

the range of activity over which we expect our assumptions about cost behavior to hold true.

Cost behavior is:

the way in which costs change when the activity level changes

A scattergraph is a graph with:

total cost plotted on the vertical axis and activity on the horizontal axis

The y-intercept of the cost line on a scattergraph represents

total fixed cost

Total contribution margin is defined as:

total sales revenues less total variable costs

A cost that changes, in total, in direct proportion to changes in activity levels is a(n):

variable cost

The slope of the cost line on a scattergraph represents

variable cost per unit