accounting topic 4
Which of the following are considered variable costs? ...property taxes ...executive salaries ...building depreciation ... maintenance materials ... sales commissions
... maintenance materials ... sales commissions
When the number of units sold is
...below the breakeven point, loss equals each unit unsold below the breakeven point multiplied by the contribution margin per unit ...above the breakeven point, profit equals units sold above the breakeven point multiplied by the contribution margin per unit
Which of the following cost examples are fixed costs? ...property taxes ...executive salaries ...building depreciation ... maintenance materials ... sales commissions
...property taxes ...executive salaries ...building depreciation
Identify the relationships that the expanded contribution margin model shows
...revenue minus variable expenses is equal to contribution margin ...total contribution margin depends on the volume of activity ...contribution margin divided by revenue is equal to contribution margin ratio ...contribution margin must cover fixed expenses before an operating income is earned
Which of the following elements are included in the contribution margin income statement format?
...revenues ...operating income ...fixed expenses ...variable expenses
MANAGERIAL ACCOUNTING (FUTURE OR PAST)
FUTURE
For a cost formula to forecast the total of fixed costs and variable costs expected to be incurred, it must be based on a specific level of
activity
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
average
revenues minus variable expenses equals
contribution margin
fixed or variable cost : supervisory salaries
fixed
Which of the following is responsible for the fact that operating income changes to a greater degree than revenue when there is a change in the volume of activity?
fixed expenses
The expanded contribution margin model provides a structure for explaining the effect on operating income of changes in:
...variable expenses ...selling price ...the volume of activity ... fixed expenses
at the breakeven point, operating income is equal to _____
0
FINANCIAL ACCOUNTING (FUTURE OR PAST)
PAST
Which of the following best describes the management process?
The process of steering an organization's activities to best support its goals
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
The relevant range assumption is about the level of production ________ and suggests that the level of fixed costs will remain constant only within certain ranges of activity
capacity
In managerial accounting, control is achieved by:
comparing planned activity to actual performance results
To calculate the volume in units at breakeven, fixed expenses are divided by the:
contribution margin per unit
To calculate total revenues at breakeven, fixed expenses are divided by the:
contribution margin ratio
A traditional income statement format is organized by function, whereas a contribution margin format income statement is organized by _________________pattern
cost behavior
The term to describe the concept that costs increase or decrease with changes in the volume of activity is known as:
cost behavior
______ can be used to forecast the total cost expected to be incurred at various levels of activity.
cost formula
As the volume of activity increases, fixed costs____ when expressed on a per unit baes
decrease
Cost behavior implies that people accountable for costs would react negatively to increases in the cost. (true or false)
false
As the volume of activity changes, a(n) ________cost changes when expressed on a per unit basis.
fixed
When classifying costs for managerial accounting purposes, it is important to recognize that each cost must be viewed Blank
for each planning, control, or decision-making situation. ... differently
The principal characteristic that distinguishes managerial accounting from financial accounting is its emphasis on the
future
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 of the following is a true statement about the contribution margin ratio?
it shows the portion of each sales dollar that remains after covering the variable costs
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
When analyzing variable costs, it is assumed that cost behavior pattern is ___________ but in reality because of other factors such as economies of scale and quantity purchase discount per unit variable costs will typically change slightly
linear
The simplifying assumption made when using variable cost behavior pattern data is:
linearity
A relative measure of risk that describes a company's current sales performance in relation to its breakeven sales is called the Blank ______.
margin of safety
another term used to describe a semi variable cost behavior pattern is:
mixed cost
What is the term for the magnifying effect a change in revenue has on operating income?
operating leverage
The need for management accountants to have a breadth of knowledge and interest about the organization and its operating environment in order to support planning, control, and decision making also suggests:
people in other functional areas of the organization should have a general understanding of managerial accounting
The logical sequence of the activities performed in the management planning and control cycle is:
planning, managing, controlling
The linearity assumption suggests that the cost behavior pattern will graph as a straight line within the
relevant range
When analyzing fixed costs, a fundamental assumption about the range of activity over which the fixed cost behavior pattern exists is known as the
relevant range
as the volume of an activity increases, fixed costs (constant, increase, or decrease)
remain constant in total
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, change)
remain the same
The contribution margin ratio is calculated by dividing contribution margin by
revenue
The high-low method of analyzing the cost behavior of a mixed cost uses a(n) ________ to illustrate cost and volume data relationships
scattergram
A firm calculates the average contribution margin ration when ___
the firm sells more than one product
Expressing a fixed cost on a per unit basis of activity is misleading because:
the fixed cost per unit decreases as the activity increases
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 indifference point is found between alternative cost structures when Blank ______ are equal for both alternatives.
total costs
Contribution margin represents the amount of revenue left over after covering variable expenses from the sale of products or services available to cover fixed expenses and provide for operating income. ( true or false )
true
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 or false )
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 remains constant when expressed on a per unit basis
variable
fixed or variable cost ...production supplies ...sales commissions ...hourly wages
variable cost
Contribution margin is defined as revenues minus:
variable expenses
