Multiple Choice Answers

When the high-low method of estimating a cost behavior pattern is used:
the cost and volume data must be reviewed for outliers.
the direct result of the high-low calculations is the fixed expense amount.
the highest and lowest sales price and volume amounts are used in the calculation.
the resulting cost formula will explain total cost accurately for every value between the high and low volumes.

The scattergram allows cost-volume relationships to be visually scanned for outlier observations that should be:
included in the calculation of the cost formula of a mixed cost.
ignored in the calculation of the cost formula of a mixed cost.
included in the calculation of the fixed cost component of the mixed cost.
included in the calculation of the variable rate component of the mixed cost.

Activities included in a generally accepted definition of management accounting include:
planning, organizing, controlling
planning, operating, reporting
preparing, operating, creating
preparing, organizing, converting

Which of the following activities is not part of the management planning and control cycle?
Data collection and performance feedback.
Implementation of plans.
Providing information to investors and creditors.
Revisiting plans.
An example of a cost that is likely to have a variable behavior pattern is:
sales force salaries.
depreciation of production equipment.
salaries of production supervisors.
production labor wages.

The contribution margin format income statement:
results in a larger amount of operating income than the traditional income statement format.
uses a behavior pattern classification for costs rather than a functional cost classification approach.
is most frequently used for financial statement reporting purposes.
emphasizes that all costs change in proportion to any change in revenues.
What percentage of the contribution margin is profit on units sold in excess of the breakeven point?
It’s 50% to the contribution margin ratio.
It’s equal to the variable cost ratio.
It’s equal of the gross profit ratio.
It’s 100%.

Managerial accounting can best be described as:
the preparation and distribution of the financial statements.
the preparation and distribution of the corporate tax return.
the preparation and use of accounting information within the organization.
meeting the requirements of generally accepted accounting principles.

When the firm’s activity requires it to operate at a level above the upper boundary of the relevant range, fixed expenses are likely to:
increase.
decrease.
remain the same.
be eliminated.

Which of the following is another term for mixed costs?
Semifixed costs.
Semivariable costs.
Component costs.
None of the above.
The cost of a single unit of production in excess of the breakeven point in units is:
its fixed cost and variable cost.
its fixed cost only.
its variable cost only.
none of the above.

An example of a cost likely to have a mixed behavior pattern is:
sales force commission.
raw material cost.
depreciation of production equipment.
electricity cost for the manufacturing plant.

Operating income using the contribution margin format income statement is calculated as:
revenue – variable expenses = contribution margin – fixed expenses.
revenue – variable expenses = gross profit – fixed expenses.
revenue – cost of goods sold = contribution margin – fixed expenses.
revenue – cost of goods sold = contribution margin – operating expenses.

Managerial accounting, as compared to financial accounting:
must conform to GAAP.
places a great deal of emphasis on historical transactions.
uses frequent and prompt control reports.
focuses on information prepared for the investors and creditors.

Managerial accounting, as opposed to financial accounting, is primarily concerned with:
preparing the current balance sheet of the company.
present and future planning and control.
providing information to investors and creditors.
historical results of operations.

Performance analysis in the planning and control cycle relates to the act of:
planning.
managing.
controlling.
revising plans.

An example of a cost likely to have a fixed behavior pattern is:
sales force commission.
production labor wages.
advertising cost.
electricity cost for packaging equipment.

The contribution margin ratio always decreases when the:
breakeven point decreases.
fixed expenses increase.
selling price increases and the variable costs remain constant.
variable cost increase and the selling price remains constant.

If fixed costs were increased by $9,000 and the contribution margin ratio remained at 30 percent, then sales must increase by $_________ in order to cover the additional fixed expenses:
$27,000
$30,000
$33,000
$54,000