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Chapters 7 & 8-2A

Name_________________________
Acct 202

Select the best answer.

1. A variable cost that has a definitive physical relationship to the activity measure is called a(n): 
A) discretionary cost. 
B) engineered cost. 
C) managed cost. 
D) programmed cost. 
E) committed cost. 

Ans: B

2. The nonstatistical method of cost estimation that calls for the creation of a scatter diagram is the: 
A) least-squares regression method. 
B) high-low method. 
C) visual-fit method. 
D) account analysis method. 
E) multiple regression method. 

Ans: C

Atlanta, Inc., which uses the high-low method to analyze cost behavior, has determined that machine hours best explain the company's utilities cost. The company's relevant range of activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the following data being available for the first six months of the year:

Month

Utilities

Machine Hours

January

$8,700

800

February

8,360

720

March

8,950

810

April

9,360

920

May

9,625

950

June

9,150

900

3. The variable utilities cost per machine hour is: 
A) $0.18. 
B) $4.50. 
C) $5.00. 
D) $5.50. 
E) an amount other than those listed above. 

Ans: D

4. The fixed utilities cost per month is: 
A) $3,764. 
B) $4,400. 
C) $4,760. 
D) $5,100. 
E) an amount other than those listed above. 

Ans: B

5. The unit contribution margin is calculated as the difference between: 
A) selling price and fixed cost per unit. 
B) selling price and variable cost per unit. 
C) selling price and product cost per unit. 
D) fixed cost per unit and variable cost per unit. 
E) fixed cost per unit and product cost per unit. 

Ans: B

6. Which of the following would take place if a company were able to reduce its variable cost per unit?

  Contribution Margin Breakeven Point
A) Increase Increase
B) Increase Decrease
C) Decrease Increase
D) Decrease Decrease
E) Increase No effect

 

Ans: B

7. Adams has a break-even point of 40,000 units. If the firm's sole product sells for $24 and fixed costs total $240,000, the variable cost per unit must be: 
A) $6. 
B) $10. 
C) $18. 
D) an amount that cannot be derived based on the information presented. 
E) an amount other than those in choices "a," "b," and "c" but one that can be derived based on the information presented. 

Ans: C

8. Wilson sells a single product for $60 that has a variable cost of $40. Fixed costs at the break-even point amount to $5 per unit. If the company sells one unit in excess of its break-even volume, the bottom-line profit will be: 
A) $15. 
B) $20. 
C) $60. 
D) an amount that cannot be derived based on the information presented. 
E) an amount other than those in choices "a," "b," and "c" but one that can be derived based on the information presented. 

Ans: B

9. The difference between budgeted sales revenue and break-even sales revenue is the: 
A) unit contribution margin. 
B) contribution margin ratio. 
C) safety margin. 
D) target net profit. 
E) operating leverage. 

Ans: C

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

Ans: D

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