Chapter 12 Multiple Choice

The formula for expressing the total of a fixed, variable, or mixed cost at any level of activity is:
a) total cost = fixed cost * variable rate
b) total cost = fixed cost + (variable rate * volume of activity)
c) total cost = fixed cost – variable cost
d) total cost = fixed cost * volume of activity
b) total cost = fixed cost + (variable rate * volume of activity)
Operating income using the contribution margin format income statement is calculated as:
a) revenue – variable expenses = gross profit – fixed expenses
b) revenue – variable expenses = contribution margin – fixed expenses
c) revenue – cost of goods sold = contribution margin – fixed expenses
d) revenue – cost of goods sold = contribution margin – operating expenses
b) revenue – variable expenses = contribution margin – fixed expenses
As the level of activity decreases:
a) variable cost remains constant in total
b) fixed cost per unit decrease
c) fixed cost remains constant in total
d) variable cost per unit decrease
a) variable cost remains constant in total
The relevant range concept refers to:
a) a firm’s range of sales
b) a firm’s range of profitability
c) a firm’s range of activity
d) a firm’s range of rates on return
c) a firm’s range of activity
Which of the following statements does not describe a characteristic of management accounting?
a) Management accounting must conform to GAAP.
b) Management accounting places a great deal of emphasis on the future.
c) Approximate amounts rather than accurate amounts or refined estimates are often used in management accounting.
d) Management accounting is more concerned with units of the organization rather than with the organization as a whole.
a) Management accounting must conform to GAAP.
Activities included in a generally accepted definition of management accounting include:
a) preparing, organizing, converting
b) planning, organizing, controlling
c) planning, operating, reporting
d) preparing, operating, creating
b) planning, organizing, controlling
The cost of a single unit of production in excess of the breakeven point in units is:
a) its fixed cost and variable cost.
b) its fixed cost only
c) its variable cost only
d) none of the above
c) its variable cost only
The contribution margin ratio always decreases when the:
a) breakeven point decreases.
b) variable cost increase and the selling price remains constant.
c) fixed expenses increase
d) selling price increases and the variable costs remain constant.
b) variable cost increase and the selling price remains constant.
Which of the following terms do not appear on the contribution margin format income statement?
a) contribution margin
b) operating margin
c) gross profit
d) variable expenses
c) gross profit
A firm has revenues of $120,000, a contribution margin ratio of 30%, and fixed expenses that total $56,000. If revenues increase by $20,000, then:
a) operating income will increase by $6000.
b) operating income will be 0.
c) fixed expenses will increase $8000.
d) the contribution margin ratio will increase by 1/8.
a) operating income will increase by $6000.
The contribution margin format income statement is organized by:
a) cost behavior classifications
b) sales territories
c) responsibility centers
d) function classifications
a) cost behavior classifications
Which of the following is the correct calculation for the contribution margin ratio?
a) Sales revenue divided by contribution margin.
b) Sales revenue divided by variable costs.
c) Contribution margin divided by sales revenue.
d) Contribution margin divided by variable costs.
c) Contribution margin divided by sales revenue.
When the cost behavior pattern has been identified as fixed at a certain volume of activity:
a) it is appropriate to express the cost on a per unit of activity basis.
b) the total cost may change if the volume of activity changes substantially.
c) any change in volume will probably cause the cost to change.
d) the total cost will not change even if the volume of activity changes substantially.
b) the total cost may change if the volume of activity changes substantially.
An example of a cost likely to have a fixed behavior pattern is:
a) production labor wages
b) electricity cost for packaging equipment
c) advertising cost
d) sales force commission
c) advertising cost
As the total volume of activity changes:
a) variable costs per unit change
b) the total of fixed costs changes
c) fixed costs per unit stay the same
d) the total of variable costs changes
d) the total of variable costs changes
An example of a cost likely to have a mixed behavior pattern is:
a) depreciation of production equipment.
b) raw material cost
c) electricity cost for the manufacturing plant
d) sales force commission
c) electricity cost for the manufacturing plant