Question 1

As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.

Accepted Answer

A) True 
 B)False

Question 2

Within the relevant range, the fixed cost per unit can be expected to decrease with increases in volume.

Accepted Answer

A) True 
 B)False

Question 3

Based on the following cost data, items labeled (a)  and (b)  in the table below are which of the following amounts, respectively?

Accepted Answer

A)   (a)  = $3.00; (b)  = $3.00
B)   (a)  = $5.00; (b)  = $4.00
C)   (a)  = $2.50; (b)  = $2.00
D)   (a)  = $5.00; (b)  = $2.00E) A) and B)
F) A) and C)

Question 4

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units. What is the margin of safety as expressed as a percentage?

Accepted Answer

A)   9.00%
B)   10.0%
C)   9.09%
D)   None of these answers is correct.E) B) and D)
F) A) and B)

Question 5

Mark Company, Inc. sells electronics. The company generated sales of $45,000. Contribution margin is $20,000 and net income is $4,000. Based on this information, the magnitude of operating leverage is:

Accepted Answer

A)   2.25
B)   11.25
C)   5.00
D)   6.25E) A) and D)
F) A) and C)

Question 6

The following information is provided for Southall Company:  What is this company's contribution margin?

Accepted Answer

A)   $30,000
B)   $17,500
C)   $45,000
D)   $67,500E) B) and C)
F) A) and B)

Question 7

Consider the following information:  Based on the above information, select the correct statement.

Accepted Answer

A)   Cost of goods sold is a mixed cost.
B)   Salary cost is a mixed cost.
C)   Depreciation cost is a variable cost.
D)   If the company sells 20 units for $540 each, it will incur a loss of $200.E) B) and C)
F) A) and B)

Question 8

The total variable cost increases in direct proportion to volume.

Accepted Answer

A) True 
 B)False

Question 9

Select the term from the list provided that best matches each of the following descriptions.
A) A condition in which a percentage change in revenue will produce a proportionately larger percentage change in net income
B) A cost that changes in total in direct proportion to changes in volume
C) A factor that causes (or drives) changes in costs
D) Costs composed of both fixed and variable components
E) The difference between a company's sales revenue and its variable costs
F) The way a cost changes relative to change in a measure of activity
G) A cost that remains constant in total when volume changes
H) A company's cost mix or relative proportion of variable and fixed costs to total costs
-Operating leverage

Accepted Answer

The answer of Select the term from the list provided...

Question 10

Which of the following costs typically include both fixed and variable components?

Accepted Answer

A)   Direct materials
B)   Direct labor
C)   Factory overhead
D)   None of theseE) B) and C)
F) A) and B)

Question 11

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles, the total cost per unit will:

Accepted Answer

A)   stay the same.
B)   decrease.
C)   double as well.
D)   increase but will not double.E) A) and D)
F) None of the above B

Question 12

The excess of revenue over variable costs is referred to as:

Accepted Answer

A)   gross profit
B)   gross margin
C)   contribution margin
D)   manufacturing marginE) A) and B)
F) All of the above

Question 13

Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

Accepted Answer

A) True 
 B)False

Question 14

If a profitable company has both fixed and variable costs, its operating leverage will always be greater than 1.

Accepted Answer

A) True 
 B)False  True

Question 15

The variable cost per unit increases in direct proportion to the activity base.

Accepted Answer

A) True 
 B)False

Question 16

The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?

Accepted Answer

A)   $2,160
B)   $7,560
C)   $3,420
D)   $1,260E) A) and B)
F) C) and D)

Question 17

Select the correct statement regarding fixed costs.

Accepted Answer

A)   There is a contradiction between the term "fixed cost per unit" and the behavior pattern implied by the term.
B)   Fixed cost per unit is not fixed.
C)   Total fixed cost remains constant when volume changes.
D)   All of these are correct statements.E) B) and D)
F) A) and D)

Question 18

Variable costs will become fixed outside the relevant range.

Accepted Answer

A) True 
 B)False

Question 19

M and M, Inc. produces a product that has a variable cost of $3.00 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What is the amount of sales that will be necessary to earn the desired profit?

Accepted Answer

A)   $75,000
B)   $50,000
C)   $83,333
D)   $125,000E) A) and B)
F) A) and C)

Question 20

If the company's volume doubles, the company's total cost will:

Accepted Answer

A)   stay the same.
B)   double as well.
C)   increase but will not double.
D)   decrease.E) A) and B)
F) All of the above C

Exam 11: Cost Behavior, Operating Leverage, and Profitability Analysis

As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.

Correct Answer
verified

Within the relevant range, the fixed cost per unit can be expected to decrease with increases in volume.

Correct Answer
verified

Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?

Correct Answer
verified

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units. What is the margin of safety as expressed as a percentage?

Correct Answer
verified

Mark Company, Inc. sells electronics. The company generated sales of $45,000. Contribution margin is $20,000 and net income is $4,000. Based on this information, the magnitude of operating leverage is:

Correct Answer
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The following information is provided for Southall Company: What is this company's contribution margin?

Correct Answer
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Consider the following information: Based on the above information, select the correct statement.

Correct Answer
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The total variable cost increases in direct proportion to volume.

Correct Answer
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Correct Answer
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Which of the following costs typically include both fixed and variable components?

Correct Answer
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Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles, the total cost per unit will:

Correct Answer
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B

The excess of revenue over variable costs is referred to as:

Correct Answer
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Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

Correct Answer
verified

If a profitable company has both fixed and variable costs, its operating leverage will always be greater than 1.

Correct Answer
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True

The variable cost per unit increases in direct proportion to the activity base.

Correct Answer
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The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?

Correct Answer
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Select the correct statement regarding fixed costs.

Correct Answer
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Variable costs will become fixed outside the relevant range.

Correct Answer
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M and M, Inc. produces a product that has a variable cost of $3.00 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What is the amount of sales that will be necessary to earn the desired profit?

Correct Answer
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If the company's volume doubles, the company's total cost will:

Correct Answer
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C

Exam 11: Cost Behavior, Operating Leverage, and Profitability Analysis

As activity increases, the fixed cost per unit increases while the variable cost per unit remains constant.

Correct AnswerverifiedShow Answer

Within the relevant range, the fixed cost per unit can be expected to decrease with increases in volume.

Correct AnswerverifiedShow Answer

Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?

Correct AnswerverifiedShow Answer

Company A has break-even sales of 90,000 units and budgeted sales of 99,000 units. What is the margin of safety as expressed as a percentage?

Correct AnswerverifiedShow Answer

Mark Company, Inc. sells electronics. The company generated sales of $45,000. Contribution margin is $20,000 and net income is $4,000. Based on this information, the magnitude of operating leverage is:

Correct AnswerverifiedShow Answer

The following information is provided for Southall Company: What is this company's contribution margin?

Correct AnswerverifiedShow Answer

Consider the following information: Based on the above information, select the correct statement.

Correct AnswerverifiedShow Answer

The total variable cost increases in direct proportion to volume.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following costs typically include both fixed and variable components?

Correct AnswerverifiedShow Answer

Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold. If the company's volume doubles, the total cost per unit will:

Correct AnswerverifiedB

The excess of revenue over variable costs is referred to as:

Correct AnswerverifiedShow Answer

Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

Correct AnswerverifiedShow Answer

If a profitable company has both fixed and variable costs, its operating leverage will always be greater than 1.

Correct AnswerverifiedTrue

The variable cost per unit increases in direct proportion to the activity base.

Correct AnswerverifiedShow Answer

The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?

Correct AnswerverifiedShow Answer

Select the correct statement regarding fixed costs.

Correct AnswerverifiedShow Answer

Variable costs will become fixed outside the relevant range.

Correct AnswerverifiedShow Answer

M and M, Inc. produces a product that has a variable cost of $3.00 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What is the amount of sales that will be necessary to earn the desired profit?

Correct AnswerverifiedShow Answer

If the company's volume doubles, the company's total cost will:

Correct AnswerverifiedC

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B

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True

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C