ACCT225 EX2

they will increase as production decreases

Within the relevant​ range, which of the following statements is true with respect to fixed costs per​ unit?

True: fixed costs per unit decrease as production levels increase

T/F: Fixed costs per unit decrease as production levels increase.

True: the line representing total fixed costs will be horizontal

T/F: The line on a graph representing total fixed costs will be a horizontal line.

True: Unit variable costs do not change as total production increases.

T/F: Unit variable costs do not change as total production increases.

They will remain the same as production levels change within the relevant range

With respect to total fixed​ costs, which of the following statements is

true​?

A. They will remain the same as production levels change within the relevant range.

B. They will decrease as production decreases within the relevant range.

C. They will decrease as production increases within the relevant range.

D. They will increase as production decreases within the relevant range.

False: mixed costs are both variable and fixed costs

T/F: Mixed costs are purely fixed.

Variable costs fluctuate in total with production and sales.

A characteristic of a variable​ cost?

True: In a manufacturing​ company, fixed costs remain the same at many different production levels within the relevant range.

T/F: In a manufacturing​ company, fixed costs remain the same at many different production levels within the relevant range.

True: Total fixed costs do not change in response to changes in the volume of production.

T/F: Total fixed costs do not change in response to changes in the volume of production.

Variable

​A(n) ________ cost is a cost whose total amount changes in direct proportion to a change in volume.

Salary of a plant manager

Which of the following costs is an example of a fixed​ cost?

A. Delivery costs

B. Salary of plant manager

C. Sales commissions

D. Direct materials

True: The fixed cost per unit does not always remain the same.

T/F: The fixed cost per unit does not always remain the same.

Mixed costs

Renting a scooter and paying​ $30 per day plus​ $.20 per mile driven is an example of what type of​ cost?

They will decrease as production decreases within the relevant range

With respect to total variable​ costs, which of the following statements is

true​?

A. They will decrease as production increases within the relevant range.

B. They will decrease as production decreases within the relevant range.

C. They will remain the same as production levels change within the relevant range.

D. They will increase as production decreases within the relevant range.

They are fixed per unit and vary in total

Variable costs are described by which of the following​ statements?

A.They are fixed per unit and vary in total.

B. They decrease per unit as production volume increases.

C.They vary per unit of output.

D. They are fixed in total.

all variable costs

​________ should be subtracted from the sales price per unit to compute the unit contribution margin.

both​ "17:4" and​ "17/21 A and​ 4/21 B"

If a company sells 17 of Product A for every 4 of Product B that it​ sells, the sales mix can be stated as

less risky than

Company A has a higher margin of safety while Company B has a lower margin of safety. Company A would be considered​ ________ Company B when considering only margin of safety.

Retailer

All of the following would be considered a company with high operating​ leverage, except

A. Retailer

B. Golf course

C. Theme park

D. Hotel

relatively high variable cost

All else being​ equal, a company with a low operating leverage will have

True: margin of safety can be stated in dollars, units, and percentage of sales

T/F: A​ company's margin of safety can be stated in dollars, units, and percentage of sales

greater the impact of volume on operating income

The higher the operating leverage​ factor, the

contributes towards fixed costs and generating a profit

The contribution margin ratio explains the percentage of each sales dollar that

profit; loss

Sales above the breakeven point indicate a​ ________, whereas sales below the breakeven point indicate a​ ________.

relatively high contribution margin ratio.

All else being​ equal, a company with a high operating leverage will have

unit contribution margin

Which of the following represents the excess of the selling price per unit of a product over the variable cost of obtaining and selling each​ unit?

generate a zero profit

The breakeven point may be defined as the number of units a company must sell to do which of the​ following?

Cost of old equipment

All of the following are relevant to the decision to replace equipment except the

A. selling price of old equipment.

B. future maintenance costs of old equipment.

C. cost of old equipment.

D. cost of new equipment.

they tend to be unique

describe the products and services of companies that are

price-​setters?

expected future costs that differ among alternatives

A​ "relevant cost" is best described by which of the​ following?

unavoidable fixed costs

Fixed costs that continue to exist even after a product line is discontinued are called

sunk costs

Managers should never consider​ ________ when making any sort of decision.

target costing

Companies that are considered price-takers usually employ the​ _________________ approach to pricing products.  

opportunity cost

The benefit foregone by choosing a particular alternative course of action is referred to as​ a(n)

a qualitative factor

The effect of a plant closing on employee morale is an example of?

cost-plus pricing and less competition

Which of the following pairs are characteristics of price-​setters?

their products are not unique

Big-box retailers such as​Lowe's are considered price-takers because

opportunity costs

If a company decides to outsource and then has freed​ capacity, the decision on what to do with that freed capacity would be based upon

make or buy decisions

Outsourcing decisions are sometimes referred to as

fixed costs that will not be affected by the order.

Managers should consider all of the following when deciding whether to accept a special​ order, except

trade-in value of the old equipment.

Which of the following is relevant when deciding to replace old equipment with​ new?

irrelevant to the decision of whether to discontinue a product line because they will not differ between alternatives.

Unavoidable fixed costs are

cost of gas

Which of the following is relevant when deciding whether to drive or fly home for semester​ break?

A. cost of annual parking at school

B. cost of gas

C. cost of car insurance

D. cost of vehicle registration

Costs that were incurred in the past and cannot be changed

Which of the following best describes a​ "sunk cost"?

relevant information

Expected future data that differs among alternative courses of action are referred to as

relevant costs

Fixed costs that may be avoided in the future are referred to as

Sales budget, production budget, direct materials budget

Which of the following alternatives reflects the proper order of preparing components of the comprehensive​ budget?

1. Production budget

2. Sales budget

3. Direct materials budget

depreciation expense

A manager considers all of the following when he or she prepares the cash budget except

A. cash receipts from customers

B. cash payments to suppliers.

C. depreciation expense.

D. payments for inventory.

establish long-term goals that extend 5-10 years into the future

Strategic planning is beneficial because the organization can

managers may build slack into the budget

Potential disadvantage of participative budgeting?

provides benchmark to evaluate performance/motivate employees, and consider relations across the value chain

Benefits of budgeting

capital expenditure

The​ ________ budget is a component in a financial budget.

sales budget

The​ ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process.

budgeted balance sheet

The​ ________ budget is a component in a financial budget.

is continuously​ updated, so that the next 12 months of operations are always budgeted.

A rolling budget is a budget that

coordinates the activities of the organization

Advantage of the budgeting process?

control operations, plan for the future, and direct operations

tasks accomplished with budgets

promote communication/coordination between departments, aid in planning and control, coordinate activities of entire organization

3 true statements about budgeting?

sales budget

In preparing the operating​ budget, the first step is preparing the

budgeted income statement, direct labor budget, and sales budget

3 things included in operating budget

Details about how the company expects to move out of the beginning cash balance and into the desired ending cash balance

​"Combined cash​ budget" is best defined by which of the​ following?

include cash to be collected in that month regardless of when the sale was made

A company should​ ________ when projecting cash receipts for a given month.

usually is made up of managers from all areas of the value chain

The budget committee

to make their performance appear better, they are uncertain of the future, and to acquire resources needed in case of a budget cut

Managers may intentionally build slack into the budget

projected: cash balance at the end of the month, cash collections and cash payments, borrowings and repayments

A combined cash budget includes all of the following

participative budgeting

Most companies use​ ________ when the lower level management develops budgets each year.