ch. 21 accounting
The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.
True
Which of the following describes the behavior of a variable cost per unit?
remains constant with changes in the activity level
Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?
salary of a factory supervisor
As production increases, variable costs per unit
stay the same
A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.
true
Cost behavior refers to the manner in which a cost changes as the related activity changes.
true
For purposes of analysis, mixed costs can generally be separated into their variable and fixed components.
true
In cost-volume-profit analysis, all costs are classified into which of the following two categories?
variable costs and fixed costs
Cost behavior refers to the manner in which a cost
changes as the related activity changes
What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
contribution margin ratio
A low operating leverage is normal for highly automated industries.
False
Companies with large amounts of fixed costs will generally have a high operating leverage.
False
If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point.
False
Which of the following describes the behavior of the fixed cost per unit?
decreases with increasing production
Which of the following is an example of a cost that varies in total as the number of units produced changes?
direct materials cost
Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours are an example of a fixed cost.
false
The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.
false
Total fixed costs change as the level of activity changes.
false
Variable costs are costs that remain constant in total dollar amount as the level of activity changes.
false
Variable costs are costs that vary on a per-unit basis with changes in the activity level.
false
The three most common cost behavior classifications are
fixed costs, variable costs, and mixed costs