accy 200 prep for Exam2

At the breakeven point, operating income is equal to

0

The following information exists for ABC Company: Selling price per unit: $30 Variable expenses per unit: $21 Fixed expenses for the period: $60,000 Sales volume in units: 10,000. If selling price is reduced by $2 and sales volume increases by 3,000 units, total contribution margin will increase by $

1000

The following information exists for ABC Company: Selling price per unit = $60. Variable expenses per unit = $40. If ABC's breakeven point is 5,000 units and it sells 5,750 units in March, its operating income will be $

15000

The following information exists for ABC Company: Selling price per unit: $30 Variable expenses per unit: $21 Fixed expenses for the period: $60,000 Sales volume in units: 10,000. Based on the information given above, ABC Company's contribution margin ratio will be

30

The relevant range assumption is about the level of production _____ and suggest that the level of fixed costs will remain constant only within certain ranges of activity.

Capacity

Which of the following is the correct calculation for the contribution margin ratio?

Contribution margin divided by selling price.

In managerial accounting, the term _____ means different things depending on the situation.

Cost

The term to describe the concept that costs increase or decrease with changes in the volume of activity is known as:

Cost behavior

Cost Behavior refers to:

Costs that are variable or fixed.

In considering whether to accept a special order at a price less than the normal selling price of the product, but the additional sales will make use of presently idle capacity, which of the following costs will not be relevant?

Depreciation of the manufacturing plant.

When considering two decision alternatives, _______ costs are those that would result from selecting one alternative instead of the other.

Differential

When classifying costs for managerial accounting purposes, it is important to recognize that each cost must be viewed ____ for each planning, control, or decision-making situation.

Differently

Which of the following cost example are fixed costs?

Executive salaries Property taxes Building depreciation

Which of the following cost examples are fixed costs?

Executive salaries, Property taxes, Building depreciation

Cost behavior implies that people accountable for costs would react negatively to increases in the cost.

False

At the break-even point:

Fixed cost is always equal to the total contribution margin.

If the selling price and variable expense per unit were to drop $2 and fixed expenses remain the same, the breakeven point would

Remain the same

Arrange the following items on the contribution margin income statement in the correct order.

Revenue, Variable expenses, Contribution margin, Fixed expenses, Operating income

Which of the following elements are included in the contribution margin income statement format?

Revenues Fixed expenses Variable expenses Operating income

Using the high-low method produces a cost formula for expressing the total of a mixed cost at any level of activity, which is:

Total cost= Fixed cost + Variable cost

The concept of different costs for different purposes means that costs must be viewed differently depending on the planning, control, or decision-making situation.

True

True or false: Operating leverage should inform management's decisions about whether to incur variable costs or fixed costs in its cost structure.

True

As the volume of activity changes, a(n) ______ cost changes in total.

Variable

When analyzing capital expenditures, the time value of money concept implies:

a dollar received today is worth more than a dollar received five years from today

The relevant range assumption relating to fixed costs refers to:

a firm's range of activity

When the number of units sold is

above the breakeven point, profit equals units sold above the breakeven point multiplied by the contribution margin per unit below the breakeven point, loss equals each unit unsold below the breakeven point multiplied by the contribution margin per unit

In capital budgeting, the cash receipts and disbursements associated with a capital expenditure over its life are known as

cash flows

Alpha and Omega Inc. produces laptops. The selling price per laptop is $300. The company has a separate division that produces the internal hard drive used in the laptop. To produce one hard drive, it spends $10 in the raw materials, $15 in direct labor, $5 in variable manufacturing overhead, and $10 in fixed manufacturing overhead. If the company decides to purchase the internal hard drive from outside, then it will cost $35 per hard drive. Also, 20 percent of the fixed cost is avoidable if the division is outsourced. Based on the scenario, Alpha and Omega Inc. should Blank______.

continue to produce the hard drives because the company will save $3 by producing them

A traditional income statement format is organized by function, whereas a contribution margin format income statement is organized by

cost behavior

Costs that will differ according to the alternative activity being considered are known as ______ costs.

differential

When considering the decision to continue or discontinue a segment of the organization, _________ fixed expenses will always be relevant to the decision and ______ fixed expenses will never be relevant to the decision.

direct common

Capital budgeting is different than operational budgeting because of the long-term time frame of the capital budget. Therefore, capital budgeting:

focuses on the present value of cash flows from investments

Relevant costs in short-run decisions are

future costs that represent differences between decision alternatives

A company's margin of safety calculation is an indication of how closely the company is operating relative to

its breakeven point

The higher a firm's contribution margin ratio, the greater its operating:

leverage

A capital budget provides the organization an overall blueprint to help the organization meet its:

long-term growth and profitability objectives

A relative measure of risk that describes a company's current sales performance in relation to its breakeven sales is called the

margin of safety

The following information exists for ABC Company: Selling price per unit = $60. Variable expenses per unit = $45. If ABC's breakeven sales revenue is $150,000 and sales revenue for April totals $140,000, then for April the company's

operating loss will be $2,500

The logical sequence of activities performed in the management planning and control cycle is:

planning > managing > controlling

Managerial accounting provides information for:

planning, control, and decision-making

Contribution margin can be expressed as:

sales minus variable expenses

The high-low method of analyzing the cost behavior of a mix costs uses a(n) ______ to illustrate cost and volume data relationships.

scattergram

A firm calculates the average contribution margin ratio when

the firm sells more than one product

The management process is illustrated through a series of key management activities referred to as:

the planning and control cycle

When a company has different products with different contribution margin ratios, the relationship of total company contribution margin to total company sales revenue is known as the _____ contribution margin ratio.

total

Managerial accounting provides information for use within an organization

true