1. The three most common cost behavior classifications are:

A. fixed costs, variable costs, and mixed costs.  

B. variable costs, product costs, and sunk costs.  

C. variable costs, sunk costs, and opportunity costs.  

D. variable costs, period costs, and differential costs.

Answer; a. fixed costs, variable costs, and mixed costs.  

2. Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low method of cost estimation, total fixed costs are:

A. $61,875  

B. $33,875  

C. $24,750  

D. cannot be determined from the data given

Answer; C. $24,750  

3. If fixed costs increased and variable costs per unit decreased, the break-even point would:

A. decrease.  

B. remain the same.  

C. increase.  

D. cannot be determined from the data provided

Answer; C. increase.  

4. If sales are $808,258, variable costs are 65% of sales, and operating income is $222,866, what is the contribution margin ratio?

Select the correct answer.

35%  

28%  

65%  

72%

5. Which of the following conditions would cause the break-even point to decrease?

a. Unit variable cost increases  

b. Unit selling price decreases  

c. Total fixed costs increase  

d. Unit variable cost decreases

6. In cost-volume-profit analysis, all costs are classified into the following two categories:

a. variable costs and fixed costs  

b. mixed costs and variable costs  

c. sunk costs and fixed costs  

d. discretionary costs and sunk costs

7. Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:

a. 47% and $11 per unit.  

b. 52% and $11 per unit.  

c. 47% and $8 per unit.  

d. 53% and $7 per unit

8. Which of the graphs in Figure 20-1 illustrates the behavior of a total variable cost?

a. Graph 2  

b. Graph 4  

c. Graph 1  

d. Graph 3

9. Contribution margin is:

a. the same as sales revenue.  

b. another term for volume in the “cost-volume-profit” analysis.  

c. the excess of sales revenue over variable cost.  

d. profit.

10. Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is:

a. expected to increase by 3%  

b. unaffected  

c. expected to increase by 4 %  

d. expected to increase by 48%

11. If sales are $861,399, variable costs are $421,360, and operating income is $276,326, what is the contribution margin ratio?

Select the correct answer.

81%  

32%  

49%  

51%

12. Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are:

What was Carter Co.’s weighted average variable cost?

a. $ 70  

b. $ 64  

c. $140  

d. $ 60

13. If fixed costs are $241,258, the unit selling price is $115, and the unit variable costs are $73, what is the break-even sales (units)?

Select the correct answer.

73 units  

5,744 units  

2,098 units  

4,825 units

14. Which of the following is an example of a cost that varies in total as the number of units produced changes?

a. Straight-line depreciation on factory equipment  

b. Direct materials cost  

c. Salary of a production supervisor  

d. Property taxes on factory buildings

15. Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are:

What was Carter Co.’s weighted average unit selling price?

a. $200  

b. $100  

c. $ 88  

d. $ 80

16. Ingram Co. manufactures office furniture. During the most productive month of the year, 3,271 desks were manufactured at a total cost of $84,759. In its slowest month, the company made 1,211 desks at a cost of $39,935. Using the high-low method of cost estimation determine total fixed costs are.

Select the correct answer.

$39,935  

$44,824  

$84,759  

$13,585

17. The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed:

a. budgetary analysis.  

b. gross profit analysis.  

c. contribution margin analysis.  

d. cost-volume-profit analysis.

18. If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

a. 3.1  

b. 1.3  

c. 1.25  

d. 0

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