TRUE-FALSE STATEMENTS 1. An activity index identifies the activity that has a causal relationship with a particular cost. 2.

A variable cost remains constant per unit at various levels of activity. 3. A fixed cost remains constant in total and on a per unit basis at various levels of activity. 4. If volume increases, all costs will increase. 5. If the activity index decreases, total variable costs will decrease proportionately. . !han"es in the level of activity will cause unit variable and unit fixed costs to chan"e in opposite directions. #. $or !%& analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant ran"e of activity. '. (he relevant ran"e of activity is the activity level where the firm will earn income. ). !osts will not chan"e in total within the relevant ran"e of activity. 1*. (he hi"h+low method is used in classifyin" a mixed cost into its variable and fixed elements. 11. A mixed cost has both sellin" and administrative cost elements. 12. (he fixed cost element of a mixed cost is the cost of havin" a service available. 13. $or plannin" purposes, mixed costs are "enerally "rouped with fixed costs. 14. (he difference between the costs at the hi"h and low levels of activity represents the fixed cost element of a mixed cost. 15. ,hen applyin" the hi"h+low method, the variable cost element of a mixed cost is calculated before the fixed cost element. 1 . An assumption of !%& analysis is that all costs can be classified as either variable or fixed. 1#. In !%& analysis, the term cost includes manufacturin" costs, and sellin" and administrative expenses. 1'. !ontribution mar"in is the amount of revenues remainin" after deductin" cost of "oods sold. 1). -nit contribution mar"in is the amount that each unit sold contributes towards the recovery of fixed costs and to income. 2*. (he contribution mar"in ratio is calculated by multiplyin" the unit contribution mar"in by the unit sales price. 21. .oth variable and fixed costs are included in calculatin" the contribution mar"in. 22. A !%& income statement shows contribution mar"in instead of "ross profit. 23. (he brea/+even point is e0ual to the fixed costs plus net income. 24. If the unit contribution mar"in is &1 and unit sales are 15,*** units above the brea/+even volume, then net income will be &15,***. 25. (he brea/+even point is where total sales e0ual total variable costs. 2 . At the brea/+even point, total revenue e0uals total fixed costs plus total variable costs. 2#. A tar"et net income is calculated by ta/in" actual sales minus the mar"in of safety. 2'. (ar"et net income is the income ob1ective for an individual product line. 2). (he mar"in of safety is the difference between contribution mar"in and fixed costs. 3*. (he mar"in of safety is the difference between sales at brea/even and sales at a determined activity level. 31. (he activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars. 32. (he trend in most companies is to have more variable costs and fewer fixed costs. 33. $or purposes of !%& analysis, mixed costs must be classified into their fixed and variable elements. 34. (he contribution mar"in ratio of 4*2 means that * cents of each sales dollar is available to cover fixed costs and to produce a profit. 35. A cost+volume+profit "raph shows the amount of net income or loss at each level of sales. 3 . If variable costs per unit are #*2 of sales, fixed costs are &2)*,*** and tar"et net income is &#*,***, re0uired sales are &1,2**,***. 3#. (he mar"in of safety ratio is e0ual to the mar"in of safety in dollars divided by the actual or 3expected4 sales. MULTIPLE CHOICE QUESTIONS 3'. $or an activity base to be useful in cost behavior analysis, a. the activity should always be stated in dollars. b. there should be a correlation between chan"es in the level of activity and chan"es in costs. c. the activity should always be stated in terms of units. d. the activity level should be constant over a period of time. 3). A variable cost is a cost that a. varies per unit at every level of activity. b. occurs at various times durin" the year. c. varies in total in proportion to chan"es in the level of activity. d. may or may not be incurred, dependin" on mana"ement5s discretion. 4*. A cost which remains constant per unit at various levels of activity is a a. variable cost. b. fixed cost. c. mixed cost. d. manufacturin" cost.

41. (wo costs at ,atson, Inc. appear below for specific months of operation. 6onth Amount -nits &roduced 7elivery costs 8anuary & 4*,*** 4*,*** $ebruary 55,*** *,*** -tilities 8anuary & '4,*** 4*,*** $ebruary 12 ,*** *,*** ,hich type of costs are these9 a. 7elivery costs and utilities are both variable. b. 7elivery costs and utilities are both mixed. c. -tilities are mixed and delivery costs are variable. d. 7elivery costs are mixed and utilities are variable. 42. An increase in the level of activity will have the followin" effects on unit costs for variable and fixed costs: -nit %ariable !ost -nit $ixed !ost a. Increases 7ecreases b. ;emains constant ;emains constant c. 7ecreases ;emains constant d. ;emains constant 7ecreases 43. A fixed cost is a cost which a. varies in total with chan"es in the level of activity. b. remains constant per unit with chan"es in the level of activity. c. varies inversely in total with chan"es in the level of activity. d. remains constant in total with chan"es in the level of activity. 44. $ixed costs normally will not include a. property taxes. c. supervisory salaries. b. direct labor. d. depreciation on buildin"s and e0uipment.

45. (he increased use of automation and less use of the wor/ force in companies has caused a trend towards an increase in a. both variable and fixed costs. b. fixed costs and a decrease in variable costs. c. variable costs and a decrease in fixed costs. d. variable costs and no chan"e in fixed costs. 4 . !ost behavior analysis is a study of how a firm5s costs a. relate to competitors5 costs. c. respond to chan"es in the level of business activity. 4#. !ost behavior analysis applies to a. retailers. b. wholesalers. 4'. If a firm increases its activity level, a. costs should remain the same. c. no costs will remain the same. 4). An activity index mi"ht be referred to as a cost a. driver. b. multiplier. 5*. !ost activity indexes mi"ht help classify costs as a. temporary. b. permanent. 51. ,hich of the followin" is not a cost classification9 a. 6ixed b. 6ultiple b. relate to "eneral price level chan"es. d. respond to chan"es in the "ross national product. d. all entities.

c. manufacturers.

b. most costs will rise. d. some costs will chan"e, others will remain the same. c. element. c. variable. c. %ariable d. correlation. d. transient. d. $ixed

52. If the activity level increases 1*2, total variable costs will a. remain the same. b. increase by more than 1*2. c. decrease by less than 1*2. d. increase 1*2. 53. ,hich of the followin" costs are variable9 !ost 1*,*** -nits 3*,*** -nits 1. &1**,*** &3**,*** 2. 4*,*** 24*,*** 3. )*,*** )*,*** 4. 5*,*** 15*,*** a. 1 and 2 b. 1 and 4 c. only 1 d. only 2

54. !han"es in activity have a3n4 <<<<<<<<< effect on fixed costs per unit. a. positive b. ne"ative c. inverse 55. ,hich of the followin" is not a fixed cost9 a. 7irect materials b. 7epreciation c. =ease char"e

d. neutral d. &roperty taxes

5 . ,hy is identification of a relevant ran"e important9 a. It is re0uired under >AA&. b. !ost behavior outside of the relevant ran"e is not linear, which distorts !%& analysis. c. It directly impacts the number of units of product a customer buys. d. It is a cost that is incurred by a company that must be accounted for. 5#. (he relevant ran"e of activity refers to the a. "eo"raphical areas where the company plans to operate. b. activity level where all costs are curvilinear. c. levels of activity over which the company expects to operate. d. level of activity where all costs are constant. 5'. ,hich of the followin" is not a plausible explanation of why variable costs often behave in a curvilinear fashion9 a. =abor speciali?ation b. @vertime wa"es c. (otal variable costs are constant within the relevant ran"e d. Availability of 0uantity discounts 5). $irms operatin" at 1**2 capacity a. are common. c. have no fixed costs. b. are the exception rather than the rule. d. have no variable costs.

*. ,hich of the followin" would be the least controllable fixed costs9 a. &roperty taxes b. ;ent c. ;esearch and development d. 6ana"ement trainin" pro"rams 1. ,hich one of the followin" is a name for the ran"e over which a company expects to operate9 a. 6ixed ran"e b. $ixed ran"e c. %ariable ran"e d. ;elevant ran"e 2. If "raphed, fixed costs that behave in a curvilinear fashion resemble a3n4 a. A+curve. b. inverted A+curve. c. strai"ht line. 3. (he "raph of variable costs that behave in a curvilinear fashion will a. approximate a strai"ht line within the relevant ran"e. b. be sharply /in/ed on both sides of the relevant ran"e. c. be downward slopin". d. be a stair+step pattern. 4. $ontain, Inc. collected the followin" production data for the past month: -nits &roduced (otal !ost 1, ** &22,*** 1,3** 1),*** 1,5** 22,5** 1,1** 1 ,5** If the hi"h+low method is used, what is the monthly total cost e0uation9 a. (otal cost B &4,4** C &11Dunit b. (otal cost B &5,5** C &1*Dunit c. (otal cost B &* C &15Dunit d. (otal cost B &3,3** C &12Dunit 5. A mixed cost contains a. a variable element and a fixed element. c. both retailin" and manufacturin" costs. b. both sellin" and administrative costs. d. both operatin" and nonoperatin" costs. d. stair+step pattern.

. At the hi"h level of activity in Eovember, #,*** machine hours were run and power costs were &12,***. In April, a month of low activity, 2,*** machine hours were run and power costs amounted to & ,***. -sin" the hi"h+low method, the estimated fixed cost element of power costs is a. &12,***. b. & ,***. c. &3, **. d. &',4**.

#. ,ynne !ompany5s hi"h and low level of activity last year was *,*** units of product produced in 6ay and 2*,*** units produced in Eovember. 6achine maintenance costs were &#',*** in 6ay and &3*,*** in Eovember. -sin" the hi"h+low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,*** units. a. & #,5** b. &#2,*** c. &5',5** d. & *,*** '. ,hich of the followin" is not true about the "raph of a mixed cost9 a. It is possible to determine the amount of the fixed cost from the "raph. b. (here is a total cost line on the "raph. c. (he fixed cost portion of the "raph is the same amount at all levels of activity. d. (he variable cost portion of the "raph is rectan"ular in shape. ). ,hich of the followin" is not a mixed cost9 a. !ar rental fee b. Flectricity c. 7epreciation d. (elephone Fxpense

#*. In usin" the hi"h+low method, the fixed cost a. is determined by subtractin" the total cost at the hi"h level of activity from the total cost at the low activity level. b. is determined by addin" the total variable cost to the total cost at the low activity level. c. is determined before the total variable cost. d. may be determined by subtractin" the total variable cost from either the total cost at the low or hi"h activity level. #1. If &hilippine Airlines cuts its domestic fares by 3*2, a. its fixed costs will decrease. b. profit will increase by 3*2. c. a profit can only be earned by decreasin" the number of fli"hts. d. a profit can be earned either by increasin" the number of passen"ers or by decreasin" variable costs. -se the followin" information for 0uestions #2G#4. 6onth 6iles (otal !ost 8anuary '*,*** & ) ,*** $ebruary 5*,*** '*,*** 6arch #*,*** )4,*** April )*,*** 13*,*** #2. In applyin" the hi"h+low method, which months are relevant9 a. 8anuary and $ebruary b. 8anuary and April c. $ebruary and April d. $ebruary and 6arch #3. In applyin" the hi"h+low method, what is the unit variable cost9 a. &1.44 b. &1.25 c. &1. * #4. In applyin" the hi"h+low method, what is the fixed cost9 a. &1#,5** b. &3 ,*** c. &14,*** #5. $or analysis purposes, the hi"h+low method usually produces a3n4 a. reasonable estimate. b. precise estimate. c. overstated estimate. d. understated estimate. # . (he hi"h+low method is critici?ed because it a. is not a "raphical method. b. is a mathematical method. c. i"nores much of the available data by concentratin" on only the extreme points. d. doesn5t provide reasonable estimates. ##. (he hi"h+low method is often employed in analy?in" a. fixed costs. b. mixed costs. c. variable costs. #'. Acorpio !ompany5s activity for the first three months of 2**' are as follows: 6achine Hours Flectrical !ost 8anuary 2,1** &2,4** $ebruary 2, ** &2,)** 6arch 2,)** &3,2** -sin" the hi"h+low method, how much is the cost per machine hour9 a. &1.** b. &1.5* c. &1.13 d. &*.') d. conversion costs. d. !annot be determined from d. &5*,***

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#). HarryIs Aeafood used hi"h+low data from 8une and 8uly to determine its variable cost of &15 per unit. Additional information follows: 6onth -nits produced (otal costs 8une 2,*** &4*,*** 8uly 1,*** 25,*** If HarryIs produces 2,3** units in Au"ust, how much is its total cost expected to be9 a. &1*,*** b. &4),5** c. &34,5** d. &44,5** '*. In !%& analysis, the term JcostJ a. includes only manufacturin" costs. b. means cost of "oods sold. c. includes manufacturin" costs plus sellin" and administrative expenses. d. excludes all fixed manufacturin" costs. '1. ,hich one of the followin" is not an assumption of !%& analysis9 a. All units produced are sold. b. All costs are variable costs. c. Aales mix remains constant. d. (he behavior of costs and revenues are linear within the relevant ran"e. '2. !%& analysis does not consider a. level of activity. b. fixed cost per unit. c. variable cost per unit. d. sales mix.

'3. ,hich of the followin" is not an underlyin" assumption of !%& analysis9 a. !han"es in activity are the only factors that affect costs. b. !ost classifications are reasonably accurate. c. .e"innin" inventory is lar"er than endin" inventory. d. Aales mix is constant. '4. !%& analysis is not important in a. calculatin" depreciation expense. c. determinin" the product mix. b. settin" sellin" prices. d. utili?in" production facilities. d. !ontrollin"

'5. (o which function of mana"ement is !%& analysis most applicable9 a. &lannin" b. 6otivatin" c. 7irectin"

' . !lar/ !ompany produces flash drives for computers, which it sells for &2* each. Fach flash drive costs &12 of variable costs to ma/e. 7urin" April, 1,*** drives were sold. $ixed costs for 6arch were &2 per unit for a total of &1,*** for the month. How much is the contribution mar"in ratio9 a. *2 b. 4*2 c. *2 d. #*2 '#. !ontribution mar"in a. is always the same as "ross profit mar"in. b. excludes variable sellin" costs from its calculation. c. is calculated by subtractin" total manufacturin" costs per unit from sales revenue per unit. d. e0uals sales revenue minus variable costs. ''. If a company had a contribution mar"in of &5**,*** and a contribution mar"in ratio of 4*2, total variable costs must have been a. &#5*,***. b. &3**,***. c. &1,25*,***. d. &2**,***. '). ,hich of the followin" would not be an acceptable way to express contribution mar"in9 a. Aales minus variable costs b. Aales minus unit costs c. -nit sellin" price minus unit variable costs d. !ontribution mar"in per unit divided by unit sellin" price )*. A company has contribution mar"in per unit of &45 and a contribution mar"in ratio of 4*2. ,hat is the unit sellin" price9 a. &#5.** b. &112.5* c. &1'.** d. !annot be determined. )1. Aales are &5**,*** and variable costs are &35*,***. ,hat is the contribution mar"in ratio9 a. 432 b. 3*2 c. #*2 d. !annot be determined.

)2. 7isneyIs variable costs are 3*2 of sales. (he company is contemplatin" an advertisin" campai"n that will cost &22,***. If sales are expected to increase &4*,***, by how much will the company5s net income increase9 a. &1',*** b. &2',*** c. &12,*** d. K ,*** )3. Hartley, Inc. has a product with a sellin" price per unit of &2**, the unit variable cost is &#5, and the total monthly fixed costs are &3**,***. How much is HartleyIs contribution mar"in ratio9 a. 2.52 b. 3#.52 c. 15*2 d. 2 . 2 )4. Aar/s !ompany has a contribution mar"in of &15*,*** and a contribution mar"in ratio of 3*2. How much are total variable costs9 a. &45,*** b. &35*,*** c. &1*5,*** d. &5**,*** )5. Harda"e !ompany has a contribution mar"in per unit of &15 and a contribution mar"in ratio of *2. How much is the sellin" price of each unit9 a. &25.** b. &3#.5* c. &).** d. !annot be determined. ) . A division sold 2**,*** calculators durin" 2**': Aales &2,***,*** %ariable costs: 6aterials &3'*,*** @rder processin" 15*,*** .illin" labor 11*,*** Aellin" expenses *,*** (otal variable costs #**,*** $ixed costs 1,***,*** How much is the contribution mar"in per unit9 a. &1.** b. &3.5* c. &'.5* d. & .5*

)#. At the brea/+even point of 2,*** units, variable costs are &55,***, and fixed costs are &32,***. How much is the sellin" price per unit9 a. &43.5* b. &11.5* c. &1 .** d. Eot enou"h information )'. (he followin" information is available for .ar/ley !ompany: Aales & **,*** (otal fixed expenses &15*,*** !ost of "oods sold 3)*,*** (otal variable expenses 3 *,*** A !%& income statement would report a. "ross profit of &21*,***. c. "ross profit of &24*,***. b. contribution mar"in of &45*,***. d. contribution mar"in of &24*,***.

)). ,hich is the true statement9 a. In a !%& income statement, costs and expenses are classified only by function. b. (he !%& income statement is prepared for both internal and external use. c. (he !%& income statement shows contribution mar"in instead of "ross profit. d. In a traditional income statement, costs and expenses are classified as either variable or fixed. 1**. (he e0uation which reflects a !%& income statement is a. Aales B !ost of "oods sold C @peratin" expenses C Eet income. b. Aales C $ixed costs B %ariable costs C Eet income. c. Aales G %ariable costs C $ixed costs B Eet income. d. Aales G %ariable costs G $ixed costs B Eet income. 1*1. (he !%& income statement a. is distributed internally and externally. b. classifies costs by functions. c. discloses contribution mar"in in the body of the statement. d. will reflect a different net income than the traditional income statement. 1*2. At the brea/+even point of 2,5** units, variable costs are &55,***, and fixed costs are &32,***. How much is the sellin" price per unit9 a. &34.'* b. &).2* c. &12.'* d. &22.** 1*3. A company has total fixed costs of &12*,*** and a contribution mar"in ratio of 2*2. (he total sales necessary to brea/ even are a. &4'*,***. b. & **,***. c. &15*,***. d. &144,***.

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1*4. A company sells a product which has a unit sales price of &5, unit variable cost of &3 and total fixed costs of &12*,***. (he number of units the company must sell to brea/ even is a. *,*** units. b. 24,*** units. c. 24*,*** units. d. 4*,*** units. 1*5. (he brea/+even point is where a. total sales e0ual total variable costs. c. total variable costs e0ual total fixed costs. 1* . (he brea/+even point cannot be determined by a. computin" it from a mathematical e0uation. c. readin" the prior year5s financial statements. b. contribution mar"in e0uals total fixed costs. d. total sales e0ual total fixed costs. b. computin" it usin" contribution mar"in. d. derivin" it from a !%& "raph.

1*#. Aelect the correct statement concernin" the cost+ volume+profit "raph at ri"ht: a. (he point identified by J.J is the brea/+even point. b. =ine $ is the variable cost line. c. At point ., profits e0ual total costs. d. =ine F is the total cost line.

1*'. $ixed costs are &3**,*** and the variable costs are #52 of the unit sellin" price. ,hat is the brea/+even point in pesos9 a. &#**,*** b. &)**,*** c. &1,2**,*** d. &4**,*** 1*). $ixed costs are &1,5**,*** and the contribution mar"in per unit is &15*. ,hat is the brea/+even point9 a. &3,#5*,*** b. &1*,***,*** c. 3,#5* units d. 1*,*** units 11*. Atarr !ompany has the followin" data: %ariable costs are *2 of the unit sellin" price. (he contribution mar"in ratio is 4*2. (he contribution mar"in per unit is &5**. (he fixed costs are &4**,***. ,hich of the followin" does not express the brea/+even point9 a. &4**,*** C . *L B L b. &4**,*** C .4*L B L c. &4**,*** M K5** B L d. &4**,*** M .4* B L 111. A !%& "raph does not include a a. variable cost line. b. fixed cost line. c. sales line. d. total cost line.

112. Hess, Inc. sells a product with a contribution mar"in of &12 per unit, fixed costs of &#4,4**, and sales for the current year of &1**,***. How much is HessIs brea/+even point9 a. 4, ** units b. &25, ** c. ,2** units d. 2,133 units 113. Autton !ompany produces flash drives for computers, which it sells for &2* each. (he variable cost to ma/e each flash drive is & . 7urin" April, #** drives were sold. $ixed costs for April were &2 per unit for a total of &1,4** for the month. How much is the monthly brea/+even level of sales in dollars for Autton !ompany9 a. &1** b. &2,*** c. &#,*** d. &4,2** 114. Aonoma ,inery has fixed costs of &1*,*** per year. Its warehouse sells wine with variable costs of '*2 of its unit sellin" price. How much in sales does Aonoma need to brea/ even per year9 a. &',*** b. &2,*** c. &12,5** d. &5*,*** 115. $allow+Haw/e is a nonprofit or"ani?ation that captures stray deer from residential communities. $ixed costs are &1*,***. (he variable cost of capturin" each deer is &1*.** each. $allow+Haw/e is funded by a local philanthropy in the amount of &32,*** for 2**'. How many deer can $allow+Haw/e capture durin" 2**'9 a. 2,2** b. 3,2** c. 4,2** d. 2,*** 11 . %ariable costs for $oley, Inc. are 252 of sales. Its sellin" price is &'* per unit. If $oley sells one unit more than brea/+even units, how much will profit increase9 a. & *.** b. &2*.** c. &2 . d. &32*.**

11#. A company re0uires &1,*2*,*** in sales to meet its net income tar"et. Its contribution mar"in is 3*2, and fixed costs are &1'*,***. ,hat is the tar"et net income9 a. &3* ,*** b. &234,*** c. &42*,*** d. &12 ,*** 11'. Heese !ompany has fixed costs of &1,5**,*** and variable costs are 4*2 of sales. ,hat are the re0uired sales if Heese !ompany desires net income of &15*,***9 a. &2,#5*,*** b. &2,5**,*** c. &4,125,*** d. &3,#5*,*** 11). ;eese !ompany re0uires sales of &2,***,*** to cover its fixed costs of &#**,*** and to earn net income of &5**,***. ,hat percent are variable costs of sales9 a. 252 b. 4*2 c. 352 d. *2 12*. .anache/, Inc. produces hair brushes. (he sellin" price is &2* per unit and the variable costs are &' per brush. $ixed costs per month are &4,'**. If .anache/ sells 15 more units beyond brea/even, how much does profit increase as a result9 a. &1'* b. &3** c. &12* d. & ** 121. Aaver !ompany produces only one product. 6onthly fixed expenses are &12,***, monthly unit sales are 2,***, and the unit contribution mar"in is &1*. How much is monthly net profit9 a. &2*,*** b. &32,*** c. &* d. &',*** 122. $orms, Inc. wants to sell a sufficient 0uantity of products to earn a profit of &4*,***. If the unit sales price is &1*, unit variable cost is &', and total fixed costs are &'*,***, how many units must be sold to earn income of &4*,***9 a. *,*** units b. 4*,*** units c. 15,*** units d. **,*** units 123. 7od"e !ompany produces flash drives for computers, which it sells for &2* each. Fach flash drive costs & of variable costs to ma/e. 7urin" 6arch, 1,*** drives were sold. $ixed costs for 6arch were &4.2* per unit for a total of &4,2** for the month. If variable costs decrease by 1*2, what happens to the brea/+even level of units per month for 7od"e !ompany9 a. It is 1*2 hi"her than the ori"inal brea/+even point. b. It decreases about 12 units. c. It decreases about 3* units. d. It depends on the number of units the company expects to produce and sell. 124. A company desires to sell a sufficient 0uantity of products to earn a profit of &1'*,***. If the unit sales price is K2*, unit variable cost is &12, and total fixed costs are &3 *,***, how many units must be sold to earn net income of &1'*,***9 a. 1*1,25* units b. #,5** units c. 54,*** units d. 4*,5** units 125. Nua/er !orporation sells its product for &4*. (he variable costs are &1' per unit. $ixed costs are &1 ,***. (he company is considerin" the purchase of an automated machine that will result in a &2 reduction in unit variable costs and an increase of &5,*** in fixed costs. ,hich of the followin" is true about the brea/+even point in units9 a. It will remain unchan"ed. b. It will decrease. c. It will increase. d. It cannot be determined from the information provided. 12 . How much sales are re0uired to earn a tar"et net income of &12',*** if total fixed costs are &1 *,*** and the contribution mar"in ratio is 4*29 a. &4**,*** b. & 4',*** c. &#2*,*** d. &32*,*** 12#. Awashbuc/ler, Inc. produces buc/ets. (he sellin" price is &2* per unit and the variable costs are &' per buc/et. $ixed costs per month are &4,'**. If Awashbuc/ler sells 1* more units beyond brea/even, how much does profit increase as a result9 a. &12* b. &4** c. & ** d. &12,*** 12'. How much sales are re0uired to earn a tar"et income of &'*,*** if total fixed costs are &1**,*** and the contribution mar"in ratio is 4*29 a. &3**,*** b. &2**,*** c. &45*,*** d. &33*,*** 12). @r"ani?er !ompany has fixed costs of &2**,*** and variable costs are *2 of sales. How much will @r"ani?er !ompany report as sales when its net income e0uals &2*,***9 a. &55*,*** b. &3 , # c. &52*,*** d. &132,*** 13*. Autton !ompany produces flash drives for computers, which it sells for &2* each. Fach flash drive costs K of variable costs to ma/e. 7urin" April, #** drives were sold. $ixed costs for April were &4 per unit for a total of &2,'** for the month. How much does AuttonIs operatin" income increase for each &1,*** increase in revenue per month9

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a. &#** b. &5** c. &14,*** d. Eone of these

131. .arcelona .a"pipes produces two models: 6odel 24 has sales of 5** units with a contribution mar"in of &4* eachO 6odel 2 has sales of 35* units with a contribution mar"in of K5* each. If sales of 6odel 2 increase by 1** units, how much will profit chan"e9 a. &5,*** increase b. &1#,5** increase c. &22,5** increase d. &35,*** increase 132. (he followin" monthly data are available for (u"", Inc. which produces only one product: Aellin" price per unit, &42O -nit variable expenses, &14O (otal fixed expenses, &#*,***O Actual sales for the month of 8une, 4,*** units. How much is the mar"in of safety for the company for 8une9 a. &42,*** b. & 3,*** c. &3#,'** d. &1,5** 133. (he amount by which actual or expected sales exceeds brea/+even sales is referred to as a. contribution mar"in. b. unanticipated profit. c. mar"in of safety. d. tar"et net income. 134. In evaluatin" the mar"in of safety, the a. brea/+even point is not relevant. b. hi"her the mar"in of safety ratio, the "reater the mar"in of safety. c. hi"her the dollar amount, the lower the mar"in of safety. d. hi"her the mar"in of safety ratio, the lower the fixed costs. 135. (he followin" monthly data are available for ,ac/adoos, Inc. which produces only one product: Aellin" price per unit, &42O -nit variable expenses, &14O (otal fixed expenses, &42,***O Actual sales for the month of 8une, 4,*** units. How much is the mar"in of safety for the company for 8une9 a. &#*,*** b. &1*5,*** c. & 3,*** d. &2,5** 13 . (iny (ots (oys has actual sales of &4**,*** and a brea/+even point of &2 *,***. How much is its mar"in of safety ratio9 a. 352 b. 52 c. 1542 d. 53.'2 13#. ,hich concept answers the followin" 0uestion: PIf bud"eted revenues are above brea/even and decline, how far can they fall before the brea/+even point is reached9Q a. !ontribution mar"in b. ;elevant ran"e of operations c. (ar"et mar"in d. 6ar"in of safety 13'. (he followin" monthly data are available for ,ac/adoos, Inc., which produces only one product: Aellin" price per unit, &42O -nit variable expenses, &14O (otal fixed expenses, &42,***O Actual sales for the month of 8une, 4,*** units. How much is the mar"in of safety for the company in 8une9 a. 3#.52 b. *2 c. 2.52 d. .#2 13). ,ithin the relevant ran"e, the variable cost per unit a. differs at each activity level. b. remains constant at each activity level. c. increases as production increases. d. decreases as production increases. 14*. An example of a mixed cost is a. direct materials. b. supervisory salaries. c. utility costs. d. property taxes.

141. In the >abbana !ompany, maintenance costs are a mixed cost. At the low level of activity 3'* direct labor hours4, maintenance costs are & **. At the hi"h level of activity 32** direct labor hours4, maintenance costs are &1,1**. -sin" the hi"h+low method, what is the variable maintenance cost per unit and the total fixed maintenance cost9 %ariable !ost &er -nit (otal $ixed !ost a. &4.1# &2 # b. &4.1# &5** c. &5.5* &22* d. &#.5* &4** 142. !ost+volume+profit analysis includes all of the followin" assumptions except a. the behavior of costs is curvilinear throu"hout the relevant ran"e. b. costs can be classified accurately as either variable or fixed. c. chan"es in activity are the only factors that affect costs. d. all units produced are sold. 143. (he contribution mar"in ratio increases when a. fixed costs increase. b. fixed costs decrease. c. variable costs as a percenta"e of sales decrease. d. variable costs as a percenta"e of sales increase.

144. !ontribution mar"in is a. the amount of revenue remainin" after deductin" fixed costs. b. available to cover fixed costs and contribute to income for the company. c. sales less fixed costs. d. unit sellin" price less unit fixed costs. 145. >ivenchy !ompany sells 1**,*** wrenches for &12.** per unit. $ixed costs are &35*,*** and net income is &25*,***. ,hat should be reported as variable expenses in the !%& income statement9 a. &54*,*** b. & **,*** c. &)5*,*** d. &'5*,*** 14 . At the brea/+even point, a. sales e0ual total variable costs. c. contribution mar"in e0uals total fixed costs. b. contribution mar"in e0uals total variable costs. d. sales e0ual total fixed costs.

14#. 7olce !ompany is plannin" to sell 4**,*** hammers for &1.5* per unit. (he contribution mar"in ratio is 2*2. If 7olce will brea/ even at this level of sales, what are the fixed costs9 a. &12*,*** b. &2'*,*** c. &4**,*** d. &4'*,*** 14'. ;e0uired sales in dollars to meet a tar"et net income is computed by dividin" a. fixed costs plus tar"et net income by contribution mar"in per unit. b. variable costs plus tar"et net income by contribution mar"in per unit. c. fixed costs plus tar"et net income by contribution mar"in ratio. d. total costs plus tar"et net income by contribution mar"in ratio. 14). =a"erfield !ompany reported the followin" results from the sale of 5,*** hammers in 6ay: sales &2**,***, variable costs &12*,***, fixed costs & *,***, and net income &2*,***. Assume that =a"erfield increases the sellin" price of hammers by 1*2 on 8une 1. How many hammers will have to be sold in 8une to maintain the same level of net income9 a. 4,*** b. 4,3** c. 4,5** d. 5,*** 15*. 6oschino !ompany sells compact dis/ players for & * each. %ariable costs are &4* per unit, and fixed costs total &3*,***. How many compact dis/ players must 6oschino sell to earn net income of &#*,***9 a. 5,*** b. 3,5** c. 2,5** d. 1,5** 151. >aultier !ompany had actual sales of &'**,*** when brea/+even sales were & **,***. ,hat is the mar"in of safety ratio9 a. 252 b. 332 c. #2 d. #52