1. (Points: 2.5) Expense A is a fixed cost; expense B is a variable cost. During the current year the activity level has increased, but is still within the relevant range. In terms of cost per unit of activity, we would expect that: a. expense A has remained unchanged. b. expense B has decreased. c. expense A has decreased. d. expense B has increased. 3. (Points: 2.5) Which costs will change with a decrease in activity within the relevant range? a. Total fixed costs and total variable cost. b. Unit fixed costs and total variable cost. c. Unit variable cost and unit fixed cost. d. Unit fixed cost and total fixed cost. 4. (Points: 2.5) Within the relevant range, the variable cost per unit: a. remains constant as activity changes. b. increases as activity increases. c. decreases as activity increases. d. can increase or decrease as the activity changes. 5. (Points: 2.5) An increase in the activity level within the relevant range results in: a. an increase in fixed cost per unit. b. a proportionate increase in total fixed costs. c. an unchanged fixed cost per unit. d. a decrease in fixed cost per unit. 6. (Points: 2.5) An example of a discretionary fixed cost is: a. insurance. b. taxes on real estate. c. management training. d. depreciation of buildings and equipment. Save Answer 8. (Points: 2.5) A cost driver is: a. the largest single category of cost in a company. b. a fixed cost that cannot be avoided. c. a factor that causes variations in a cost. d. an indirect cost that is essential to the business. Save Answer 9. (Points: 2.5) The contribution approach to the income statement: a. organizes costs on a functional basis. b. is useful to managers in planning and decision making. c. shows a contribution margin rather than a net operating income figure at the bottom of the statement. d. can be used only by manufacturing companies. Save Answer 10. (Points: 2.5) Contribution margin is the excess of revenues over: a. cost of goods sold. b. manufacturing cost. c. all direct costs. d. all variable costs. Save Answer 11. (Points: 2.5) Iacopi Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $172.50 per unit. The best estimate of the total contribution margin when 4,300 units are sold is: a. $343,140 b. $65,790 c. $121,260 d. $411,080 Save Answer 12. (Points: 2.5) Once the break-even point is reached: a. the total contribution margin changes from negative to positive. b. net operating income will increase by the unit contribution margin for each additional item sold. c. variable expenses will remain constant in total. d. the contribution margin ratio begins to decrease. Save Answer 13. (Points: 2.5) Which of the following is true regarding the contribution margin ratio of a single product company? a. As fixed expenses decrease, the contribution margin ratio increases. b. The contribution margin ratio multiplied by the variable expense per unit equals the contribution margin per unit. c. If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales. d. The contribution margin ratio increases as the number of units sold increases. Save Answer 14. (Points: 2.5) Assuming that the unit sales are unchanged, the total contribution margin will decrease if: a. fixed expenses increase. b. fixed expenses decrease. c. variable expense per unit increases. d. variable expense per unit decreases. Save Answer 15. (Points: 2.5) The ratio of fixed expenses to the unit contribution margin is the: a. break-even point in unit sales. b. profit margin. c. contribution margin ratio. d. margin of safety. Save Answer 17. (Points: 2.5) North Company sells a single product. The product has a selling price of $30 per unit and variable expenses of 70% of sales. If the company's fixed expenses total $60,000 per year, then it will have a break-even of: a. $60,000 b. $85,714 c. $42,000 d. $200,000 Save Answer 18. (Points: 2.5) Fenestre Corporation's contribution margin ratio is 25%. The company's break-even is 80,000 units and the selling price of its only product is $4.00 a unit. What are the company's fixed expenses? a. $80,000 b. $320,000 c. $20,000 d. $120,000 Save Answer 19. (Points: 2.5) Mitch Corporation's contribution margin ratio is 14% and its fixed monthly expenses are $87,000. If the company's sales for a month are $678,000, what is the best estimate of the company's net operating income? Assume that the fixed monthly expenses do not change. a. $591,000 b. $496,080 c. $94,920 d. $7,920 Save Answer 20. (Points: 2.5) Riven Corporation has a single product whose selling price is $10. At an expected sales level of $1,000,000, the company's variable expenses are $600,000 and its fixed expenses are $300,000. The marketing manager has recommended that the selling price be increased by 20%, with an expected decrease of only 10% in unit sales. What would be the company's net operating income if the marketing manager's recommendation is adopted? a. $132,000 b. $290,000 c. $180,000 d. $240,000 Save Answer 21. (Points: 2.5) Which of the following statements is true? a. When production exceeds sales, a manufacturing company's variable costing net operating income will usually be greater than its absorption costing net operating income. b. The variable costing method is usually not used for external reporting purposes. c. The absorption costing method treats fixed production costs as period costs. d. All of these. Save Answer 22. (Points: 2.5) A cost that would be included in product costs under both absorption costing and variable costing would be: a. supervisory salaries. b. equipment depreciation. c. variable manufacturing costs. d. variable selling expenses. Save Answer 23. (Points: 2.5) Which of the following costs at a manufacturing company would be treated as a product cost under the absorption costing method? a. sales commissions b. fire insurance cost on factory building c. advertising costs d. All of these Save Answer 24. (Points: 2.5) Assuming that direct labor is a variable cost, product costs under variable costing include only: a. direct materials and direct labor. b. direct materials, direct labor, and variable manufacturing overhead. c. direct materials, direct labor, variable manufacturing overhead, and variable selling and administrative expenses. d. direct material, variable manufacturing overhead, and variable selling and administrative expenses. Save Answer 25. (Points: 2.5) What is the cause of the difference between absorption costing net operating income and variable costing net operating income? a. Absorption costing deducts all manufacturing costs from net operating income; variable costing deducts only prime costs. b. Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories; variable costing considers all fixed manufacturing costs to be period costs. c. Absorption costing includes variable manufacturing costs in product costs; variable costing considers variable manufacturing costs to be period costs. d. Absorption costing includes fixed administrative costs in product costs; variable costing considers fixed administrative costs to be period costs. Save Answer Save Answer 31. (Points: 2.5) The master budget process usually begins with the: a. production budget. b. operating budget. c. sales budget. d. cash budget. Save Answer 32. (Points: 2.5) Which of the following is not a benefit of budgeting? a. It uncovers potential bottlenecks before they occur. b. It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts. c. It ensures that accounting records comply with generally accepted accounting principles. d. It provides benchmarks for evaluating subsequent performance. Save Answer 33. (Points: 2.5) The concept of responsibility accounting means that: a. Budgetary data should be reviewed and approved by the budget committee. b. Budgetary data should be reviewed and approved by all levels of management. c. An employee's performance should be evaluated only on those items under his or her control. d. An employee's performance should be evaluated only by his or her immediate supervisor. Save Answer 34. (Points: 2.5) A self-imposed budget or ________________ budget is a budget that is prepared with the full cooperation of managers at all levels. a. perpetual b. master c. participative d. responsibility Save Answer 36. (Points: 2.5) Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units must be produced during the month? a. 11,500 b. 12,500 c. 12,000 d. 14,000 40. (Points: 2.5) Brummitt Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.05 direct labor-hours. The direct labor rate is $7.50 per direct labor-hour. The production budget calls for producing 9,100 units in May and 8,800 units in June. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? a. $3,300.00 b. $3,412.50 c. $6,712.50 d. $3,356.25 Save