Accounting Chapter 4

ABC Company used the high-low method to analyze monthly mixed costs. The resulting cost formula is $3,600 + $5 per unit produced. If ABC produces 4,000 units the next month, total mixed costs expected will be

$23,600, 23,600, or 23600

If a firm has revenues of $80,000, variable expenses of $25,000, operating income of $20,000, then its contribution margin is Blank______ and fixed expenses is Blank______.

$55,000; $35,000

During a year, ABC Company had monthly mixed costs that ranged between $6,000 and $12,000 and units produced that ranged between 800 and 1,800 for the same months. Using the high-low method, the variable rate per unit produced is $

6

How can a company eliminate the need to be concerned about changes in the sales mix?

By having a similar contribution margin ratio for all of its products

When a firm's sales mix includes products that range in quality, the highest quality products will have which of the following?

Higher contribution margin ratios

Managerial accounting helps support what kind of planning decisions made by an entity's management?

Internal forward-looking decisions

Which are true statements about cost-volume-profit (CVP) analysis?

It is an analytical technique that explains the impact on profit for any changes in revenues, costs, or the volume of activity. It is useful for planning and for evaluating the results of actual operations as it emphasizes the cost behavior pattern of various costs.

Which of the following are considered variable costs? (Check all that apply).

Maintenance materials Sales commissions

Which of the following are considered fixed costs? (Check all that apply).

Supervisory salaries Raw materials

Which of the following characteristics apply to managerial accounting as opposed to financial accounting?

Time frame involved is present and future for planning and control. Breadth of concern is on individual units of the organization plans and activities.

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

capacity

As the volume of activity increases, fixed costs Blank______ when expressed on a per unit basis.

decrease

Expressing a fixed cost on a per unit basis of activity is misleading because:

the fixed cost per unit decreases as the activity increases