29 Jun Question Question 1.1.Select the correct statement regarding fixed costs. (Points : 2)
Question
Question 1.1.Select the correct statement regarding fixed costs. (Points : 2)
They do not change, because fixed costs should be ignored in decision making.
The fixed cost per unit increases when volume increases.
The fixed cost per unit decreases when volume increases.
The fixed cost per unit does not change when volume decreases.
Question 2.2.Hico Bottling Company pays its production manager a salary of $5,000 per month. Salespersons are paid strictly on commission, at $2 for each case of product sold.
For Hico Bottling Company, the production manager’s salary is an example of: (Points : 2)
a variable cost.
a fixed cost.
a mixed cost.
none of the above.
Question 3.3.Select the correct statement regarding fixed costs. (Points : 2)
There is a contradiction between the term “fixed cost per unit” and the behavior pattern implied by the term.
Fixed cost per unit is not fixed.
Total fixed cost remains constant when volume changes.
All of the above are correct statements.
Question 4.4.Java Joe’s operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $2,000 per month, and all other employees are paid on an hourly basis. Relative to the number of customers for a shop, the cost of rent is which kind of cost? (Points : 2)
Fixed cost
Variable cost
Mixed cost
Relevant cost
Question 5.5.Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product were made and sold. If the company’s volume doubles, the company’s total cost will: (Points : 2)
stay the same.
double as well.
increase but will not double.
decrease.
Question 6.6.Select the incorrect statement regarding the contribution margin income statement. (Points : 2)
The contribution margin approach for the income statement is acceptable for external reporting.
Contribution margin represents the amount available to cover fixed expenses and thereafter to provide profit.
The contribution margin approach to preparing an income statement requires that all costs be classified as fixed or variable.
Assuming no change in fixed costs, a $1 increase in contribution margin will result in a $1 increase in profit.
Question 7.7.Once sales reach the breakeven point, each additional unit sold will: (Points : 2)
increase fixed cost by a proportionate amount.
reduce the margin of safety.
increase profit by an amount equal to the per unit contribution margin.
increase the company’s operating leverage.
Question 8.8.The following income statement is provided for Flint, Inc.
Sales revenue (2,500 @ $20 a unit)
$50,000
Variable costs (2,500 x $11)
27,500
Fixed costs
17,000
Net income
$ 5,500
What is this company’s magnitude of operating leverage? (Points : 2)
9.1
5.00
4.1
1.8
Question 9.9.At its $25 selling price, Paciolli Company has sales of $10,000, variable manufacturing costs of $4,000, fixed manufacturing costs of $1,000, variable selling and administrative costs of $2,000 and fixed selling and administrative costs of $1,000. What is the company’s contribution margin per unit? (Points : 2)
$15
$10
$0.60
$0.40
Question 10.10.Operating leverage exists when: (Points : 2)
small percentage changes in revenue produce large percentage changes in profit.
management buys enough of the company’s shares of stock to take control of the corporation.
the organization makes purchases on credit instead of paying cash.
the organization avoids all fixed costs in its operations.
Question 11.11.Wall Company incurred $30,000 of fixed cost and $40,000 of variable cost when 1,000 units of product were made and sold. If the company’s volume increases to 1,500 units, the company’s total costs will be: (Points : 2)
$80,000
$105,000
$87,500
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