ACG2071 Exam 1 PRACTICE

B) operating leverage factor

A manager who wants to determine the percentage impact on income of a given percentage change in sales would multiply the percentage increase/decrease in sales revenue by the: A) contribution margin. B) operating leverage factor. C) contribution-margin ratio. D) gross margin. E) safety margin.

relevant range

the range of activity in which management of a company expects to operate.

B) a 25% increase in total variable costs

A 25% increase in production volume will result in: A) none of these answer choices is correct. B) a 25% increase in total variable costs. C) a 25% increase in total administration costs. D) a 25% increase in the variable cost per unit. E) a 25% increase in total mixed costs.

B) stimulate sales volume

If a company desires to increase its safety margin, it should: A) attempt to raise the break-even point. B) stimulate sales volume. C) increase fixed costs. D) decrease the contribution margin. E) decrease selling prices, assuming the price change will have no effect on demand.

B) The break-even point would decrease

If a company experiences a decrease in fixed costs, which of the following would occur? A) More than one of the answers would occur B) The break-even point would decrease C) The contribution margin would increase D) Income would decrease E) The contribution margin would decreaseB) The break-even point would decrease

Product cost

Rent on a factory building would be considered to be:

B) contribution margin

All other things being equal, a company that sells multiple products should attempt to structure its sales mix, so the greatest portion of the mix is composed of those products with the highest: A) gross margin. B) contribution margin. C) variable cost. D) selling price. E) fixed cost.

B) Variable cost per unit

Grandma Gifts had the following costs in March when 400 ceramic statues were produced: materials, $4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. Which of the following costs will stay the same assuming that production changes to 500 units and production still remains within the relevant range? A) Fixed cost per unit B) Variable cost per unit C) Total cost per unit D) Total variable cost E) None of these answer choices is correct

A) Plant Manager

In a manufacturing plant, which is an example of indirect labor? A) Plant Manager B) Machine Operators C) Salespersons D) Chief Operating Officer

E) sales volume changes

Operating leverage predicts the effects fixed costs have on changes in operating income when: A) none of these answer choices is correct. B) there are no sales returns. C) production is discontinued. D) variable costs change. E) sales volume changes.

C) Cost-volume-profit relationships can be analyzed more easily from the contribution income statement.

The contribution income statement differs from the traditional income statement in which of the following ways? A)The traditional income statement subtracts all variable costs from sales to obtain the contribution margin B)The traditional income statement separates costs into fixed and variable components C) Cost-volume-profit relationships can be analyzed more easily from the contribution income statement D) The effect of sales volume changes on profit is readily apparent on the traditional income statement E) The contribution income statement separates costs into product and period categories

true

True/False: Cost structures differ widely among industries and among firms within an industry.

A) An Indirect Cost

When determining the cost of a manufactured product, a factory janitor's wages would be classified as: A) An Indirect Cost B) A Direct Cost C) A Direct Material Cost D) A Period Cost

decrease

When fixed costs decrease and all other variables remain unchanged, the break-even point will _____

B) product costs, and expensed when the goods are sold.

When manufacturing products, direct labor and direct materials are classified as: A) period costs, and expensed when incurred B) product costs, and expensed when the goods are sold. C) period costs, and expensed when the goods are sold D) product costs, and expensed when incurred.

A) Advertising Expense

When manufacturing products, which of the following is an example of a period cost? A) Advertising expense B) Depreciation expense on factory equipment C) Property taxes on the plant D) Indirect materials used in the factory

B) increase

When sales price decreases and all other variables are held constant, the break-even point will ________. A) remain unchanged B) increase C) produce a higher contribution margin D) decrease

B) increase

When variable costs increase and all other variables remain unchanged, the break-even point will ________. A) decrease B) increase C) remain unchanged D) produce a lower contribution margin

C) Indirect labor and indirect materials.

Which of the following are classified as manufacturing overhead? A) Factory rent and direct labor B) Direct materials and direct labor C) Indirect labor and indirect materials D) All materials

E) Sunk Costs

Which of the following costs should be ignored when choosing among alternatives? A) None of the answers is correct B) Differential costs C) Opportunity costs D) Out-of-pocket costs E) Sunk costs

D) To refrain from engaging in an activity that would discredit the accounting profession

Which of the following is not an element of competency? A) To develop appropriate knowledge about a particular subject B) To perform duties in accordance with relevant laws C) To prepare clear reports after an analysis of relevant and reliable information D) To refrain from engaging in an activity that would discredit the accounting profession E) To perform duties in accordance with relevant technical standards

A) Product costs are expensed in the period the related product is sold.

Which of the following statements is correct concerning product costs? A) Product costs are expensed in the period the related product is sold. B) Product costs are shown with current liabilities on the balance sheet C) Product costs are expensed in the period incurred D) Product costs are shown with operating expenses on the income statement

C) An 8% increase in selling price.

Which of the following would produce the largest increase in the contribution margin per unit? A) A 16% decrease in fixed cost B) A 22% increase in the number of units sold C) A 8% increase in selling price D) A 14% decrease in selling price E) A 13% increase in variable cost

Controller

Which role is normally involved with preparing financial statements?