The difference between total sales in dollars and total variable expenses is called:

Question 1

The difference between total sales in dollars and total variable expenses is called:

A. net operating income.

B. net profit.

C. the gross margin.

D. the contribution margin.

Question 2

With regard to the CVP graph, which of the following statements is not correct?

A. The CVP graph assumes that volume is the only factor affecting total cost.

B. The CVP graph assumes that selling prices do not change.

C. The CVP graph assumes that variable costs go down as volume goes up.

D. The CVP graph assumes that fixed expenses are constant in total within the relevant range.

Question 3

Which of the following formulas is used to calculate the contribution margin ratio?

A. (Sales - Fixed expenses)  Sales

B. (Sales - Cost of goods sold)  Sales

C. (Sales - Variable expenses)  Sales

D. (Sales - Total expenses)  Sales

Question 4

The break-even point in unit sales is found by dividing total fixed expenses by:

A. the contribution margin ratio.

B. the variable expenses per unit.

C. the sales price per unit.

D. the contribution margin per unit.

Question 5

Break-even analysis assumes that:

A. total costs are constant.

B. the average fixed expense per unit is constant.

C. the average variable expense per unit is constant.

D. variable expenses are nonlinear.

Question 6

The break-even point in unit sales increases when variable expenses:

A. increase and the selling price remains unchanged.

B. decrease and the selling price remains unchanged.

C. decrease and the selling price increases.

D. remain unchanged and the selling price increases.

Question 7

The margin of safety percentage is computed as:

A. Break-even sales  Total sales.

B. Total sales - Break-even sales.

C. (Total sales - Break-even sales)  Break-even sales.

D. (Total sales - Break-even sales)  Total sales.

Question 8

The degree of operating leverage can be calculated as:

A. contribution margin divided by sales.

B. gross margin divided by net operating income.

C. net operating income divided by sales.

D. contribution margin divided by net operating income.

Question 9

Which of the following are considered to be product costs under variable costing?

I. Variable manufacturing overhead.

II. Fixed manufacturing overhead.

III. Selling and administrative expenses.

A. I.

B. I and II.

C. I and III.

D. I, II, and III.

Question 10

Which of the following are considered to be product costs under absorption costing?

I. Variable manufacturing overhead.

II. Fixed manufacturing overhead.

III. Selling and administrative expenses.

A. I, II, and III.

B. I and II.

C. I and III.

D. I.

Question 11

Under variable costing, costs that are treated as period costs include:

A. only fixed manufacturing costs.

B. both variable and fixed manufacturing costs.

C. all fixed costs.

D. only fixed selling and administrative costs.

Question 12

A company using lean production methods likely would show approximately the same net operating income under both absorption and variable costing because:

A. ending inventory would be valued in the same manner for both methods under lean production.

B. production is geared to sales under lean production and thus there would be little or no ending inventory.

C. under lean production fixed manufacturing overhead costs are charged to the period incurred rather than to the product produced.

D. there is no distinction made under lean production between fixed and variable costs.

Question 13

A common cost that should not be assigned to a particular product on a segmented income statement is:

A. the product's advertising costs.

B. the salary of the corporation president.

C. direct materials costs.

D. the product manager's salary.

Question 14

Personnel administration is an example of (an):

A. Unit-level activity.

B. Batch-level activity.

C. Product-level activity.

D. Organization-sustaining activity.

Question 15

Which of the following activities would be classified as a batch-level activity?

A. Setting up equipment.

B. Designing a new product.

C. Training employees.

D. Milling a part required for the final product.

Question 16

A duration driver is:

A. A simple count of the number of times an activity occurs.

B. An activity measure that is used for the life of the company.

C. A measure of the amount of time required to perform an activity.

D. An activity measure that is used for the life of an activity-based costing system.

Question 17

A transaction driver is:

A. An event that causes a transaction to begin.

B. A measure of the amount of time required to perform an activity.

C. An event that causes a transaction to end.

D. A simple count of the number of times an activity occurs.

Question 18

Designing a new product is an example of (an):

A. Unit-level activity.

B. Batch-level activity.

C. Product-level activity.

D. Organization-sustaining activity.

Question 19

Property taxes are an example of a cost that would be considered to be:

A. Unit-level.

B. Batch-level.

C. Product-level.

D. Organization-sustaining.

Question 20

Unit-level activities are performed each time a unit is produced.

True

False

Question 21

Organization-sustaining activities are activities of the general organization that support specific products.

True

False

Question 22

Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume.

True

False

Question 23

Customer-level activities relate to specific customers and are not tied to any specific products.

True

False

Question 24

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.

True

False

Question 25

Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports.