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