ACCY 200 SB 6

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

1. Planning 2. Managing 3. Controlling

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

1. Revenue 2. Variable expenses 3. Contribution margin 4. Fixed expenses 5. Operating income

A firm has revenues of $240,000, a contribution margin ratio of 30%, and fixed expenses that total $112,000. If revenues increase by $40,000, then operating income will increase by $

12000

From the following cost examples, identify the fixed costs.

Executive salaries Building depreciation Property taxes

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

Fixed expenses Variable expenses Contribution margin Operating income Revenues

_______ accounting provides information to support an organization's planning, control and decision-making needs.

Managerial

Capital expenditure analysis attempts to measure the impact of a proposed capital investments on the organization's overall ____ objectives.

ROI

Which of the following items are relevant in a decision to continue or discontinue a segment of an organization?

Segment contribution margin Segment direct fixed expenses Segment variable expenses Segment sales

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.

A cost behavior pattern describes the relationship of total cost to volume of _____

activity

The principal (advantage/disadvantage) of the net present value method for evaluating proposed capital investments is that it (considers/ignores) the time value of money.

advantage considers

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

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

breakeven point

When management considers a capital budgeting expenditure, present value analysis most accurately informs the decision process; however:

decisions are significantly influenced by top management's values and experiences

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

differential

When considering two decision alternatives, _____________ costs are those costs 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

When considering the decision to continue or discontinue a segment of the organization,(common/direct) fixed expenses will always be relevant to the decision and (common/direct) fixed expenses will never be relevant to the decision.

direct common

As the volume of activity changes, a(n) ______ cost changes when expressed on a per unit basis.

fixed

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

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

leverage

A relative measure of risk that describes a company's current sales performance in relation to its break-even sales is called the _____.

margin of safety

Beta and Gama Inc. produces a product that currently sells for $250 per unit. Current production costs per unit includes direct materials of $30, direct labor of $25, variable overhead of $15, fixed overhead of $20, and total production costs of $90. Beta and Gama Inc. has received a special pricing offer from a nonprofit organization to buy 1,000 units at $200 per unit. Beta and Gama Inc. is currently operating at its full production capacity. Based on the scenario, Beta and Gama Inc. should _____.

not accept the special order as the company will lose $50,000 if it accepts the special order

Capital budgeting procedures should involve the use of _______ analysis because an investment is made today in expectation of returns far into the future

present value

After the results of a present value analysis has been obtained for a capital investment opportunity, overriding _____ factors should also be considered before a final decision is made.

qualitative

At the breakeven point, operating income is equal to

zero

ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10. Product engineering has determined that a certain portion of the product conversion could be outsourced. Direct labor and variable overhead would be reduced by 50 percent. Raw material would not be affected and no other alternative use for any idle production capacity is apparent. The outsourcing supplier would charge ABC $15 to provide this product conversion. Identify the following relevant costs to process further:

17 15 2 Buy

When considering the decision for solving product mix problems involving multiple products and scarce production resources, the decision should focus on:

contribution margin per unit of scarce resource

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

cost behavior

Relevant costs in short-run decisions are:

future costs that represent differences between decision alternatives

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

When considering the product mix decision and the allocation of scarce production capacity resources, the objective is to maximize contribution margin in terms of the

scarce resource

A firm calculates the average contribution margin ratio when _____.

the firm sells more than one product

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

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

cash flow

Future costs that represent differences between decision alternatives and are the key to effective decision making are called ____ costs.

relevant

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

cost

Sometimes when management decisions are reached, the investment project with the highest NPV or IRR is not selected because (qualitative/quantitative) factors override(qualitative/quantitative) analysis.

quantitative qualitative

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

scattergram

Alpha & Omega Inc. produces laptops and the selling price per laptop is $300. Currently, the company has a separate division that produces the internal hard drive used in the laptop. To produce one such 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 & Omega Inc. should _____.

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

Which of the following capital budgeting techniques use present value analysis?

The internal rate of return method The net present value method

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 rate x Volume of activity)

Which of the following equations describes the breakeven point?

Total revenue = Total expenses Contribution margin = Fixed expenses Operating income = Zero

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

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

ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10 Product engineering has determined that certain production changes could refine the product quality and functionality. These changes would increase material and labor costs by 25 percent per unit. ABC could sell the refined version of its product for $84 per unit. Identify the following relevant costs to process further:

12 11 1 yes

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

In the planning and control cycle, feedback is obtained by comparing planned activity with _____ results

actual