Financial and Managerial Accounting Final Exam Conceptual

CVP analysis focuses on how profits are affected by ______

unit variable cost, sales volume, total fixed costs, selling price, and mix of products sold

The contribution margin income statement allows users to easily judge the impact of a change in ______ on profit.

cost, selling price, volume

The contribution margin equals sales minus all ______ expenses.

variable

According to the CVP analysis model and assuming all else remains the same, profits would be increased by a(n):

decrease in the unit variable cost.

To prepare a CVP graph, lines must be drawn representing total revenue, ______.

total expense, and total fixed expense

Users can easily judge the impact on profits of changes in selling price, cost or volume when using an income statement constructed under the ______ approach.

contribution margin

The calculation of contribution margin (CM) ratio is ______.

contribution margin/ sales

Contribution margin:

becomes profit after fixed expenses are covered.

The variable expense ratio equals variable expenses divided by ______.

sales

Profit Equals:

(P × Q - V × Q) - fixed expenses.

When preparing a CVP graph, the horizontal axis represents:

untit volume

The contribution margin as a percentage of sales is referred to as the contribution margin or CM ____

ratio

The variable expense ratio is the ratio of variable expense to ______.

sales

The amount by which sales can drop before losses are incurred is the _____

margin of safety

When constructing a CVP graph, the vertical axis represents:

dollars

A company with a high ratio of fixed costs:

is more likely to experience greater profits when sales are up than a company with mostly variable costs AND is more likely to experience a loss when sales are down than a company with mostly variable costs.

The measure of how a percentage change in sales affects profits at any given level of sales is the ______.

degree of operating leverage

The term used for the relative proportion in which a company's products are sold is ______

sales mix

The term "cost structure" refers to the relative proportion of ___ and ___ costs in an organization

fixed and variable

The break-even point calculation is affected by ______.

selling price per unit, costs per unit, and sales mix 

When compared to a company with higher fixed costs and lower variable costs, a company with lower fixed costs and higher variable costs, has ______.

better protection from loss in bad years, lower net income in good years, and greater profit stability

Cost behavior is considered linear whenever _____ 

a straight line approximates the relationship between cost and activity

The rise-over-run formula for the slope of a straight line is the basis of

the high-low method

When a company produces and sells multiple products ______

a change in the sales mix will most likely change the break-even point, each product most likely has different costs, and each product most likely has a unique contribution margin

The best fitting line minimizes the sum of the squared errors when using ______.

least-square regression

Estimating the fixed and variable components of a mixed cost using the _____ approach involves a detailed analysis of what cost behavior should be

engineering

When using the high-low method, the slope of the line equals the _____ cost per unit of activity.

variable

A method that uses all the available data points to divide a mixed cost into its fixed and variable components is called ______

least-squares regression