TEST II:Multiple Choice 20 points

1. Fixed costs
2. Remain constant in total as volume changes
3. Are fixed per unit as volume changes
4. Increase in per unit as volume increases
5. Are always product cost.

1. Contribution margin is equal to
2. Revenue minus variable costs
3. Fixed costs plus profit before tax
4. Contribution margin per unit multiplied by number of units sold
5. All of the above

1. At break-even point, fixed cost is always
2. Less than the contribution margin c. More than the contribution margin
3. Equal to the contribution margin d. More than the variable costs

1. Margin of safety reveals the amount by which sales could decrease before losses occur is computed by
2. Subtracting variable costs form sales
3. Adding variable costs and fixed costs
4. Subtracting break-even sales from actual sales
5. Adding contribution margin and fixed costs

1. In using cost-volume-profit analysis to calculate the expected sales level expressed in units, a predicted operating loss would be
2. Added to the fixed costs in the numerator
3. Added to the fixed costs in the denominator
4. Subtracted from fixed costs in the numerator
5. Subtracted from fixed costs in the denominator

1. The type of costs presented to management for an equipment replacement decision should be limited to
2. Relevant costs c. Standard costs
3. Controllable costs d. Conversion costs

1. In a make or buy decision
2. Only variable costs are relevant
3. Fixed costs that can avoided in the future are relevant
4. Fixed costs that will continue regardless of the decision are relevant
5. Only conversion costs are relevant

1. In considering special order situation that will enable a company to make use of presently idle capacity, which of the following costs would be irrelevant?
2. Raw materials
3. Depreciation
4. Direct labor
5. Variable overhead

1. A cost incurred in the past and hence irrelevant for current decision making is s
2. Fixed cost c. Sunk cost
3. Discretionary cost d. Direct cost

1. Which of the following is not a short-term decision?
2. Accept special order
3. Make or buy a component
4. Replacement of a machine
5. Sell a joint product at split-off or process further.