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Chapter 11
1. Cost behavior refers to the manner in which a cost changes as a related activity changes.
a.
True
b.
False
2. Activities that cause costs to change are called activity bases.
a.
True
b.
False
3. The variable cost per unit remains constant with changes in the level of activity.
a.
True
Chapter 11
b.
False
4. Monthly rent on a factory building is an example of a fixed cost.
a.
True
b.
False
5. Direct materials cost is an example of a fixed cost of production.
a.
True
b.
False
Chapter 11
6. The relevant range is useful for analyzing cost behavior for management decision-making purposes.
a.
True
b.
False
7. The range of activity over which changes in cost are of interest to management is called the relevant range.
a.
True
b.
False
Chapter 11
8. Total fixed costs remain constant as the level of activity changes within the relevant range.
a.
True
b.
False
9. The graph of the variable costs when plotted against the activity level appears as a line parallel to horizontal axis.
a.
True
b.
False
Chapter 11
10. Fixed costs are costs that vary in total dollar amount as the level of activity changes.
a.
True
b.
False
11. A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.
a.
True
b.
False
Chapter 11
12. Variable costs are costs that vary on a per-unit basis as the level of manufacturing activity changes.
a.
True
b.
False
13. Variable costs are costs that vary in total in direct proportion to changes in the activity level.
a.
True
b.
False
Chapter 11
14. Variable costs are costs that remain constant in total with changes in the activity level.
a.
True
b.
False
15. Direct materials and direct labor costs are examples of variable costs of production.
a.
True
b.
False
Chapter 11
16. Variable cost per unit remains the same regardless of activity level.
a.
True
b.
False
17. A mixed cost has characteristics of both a variable cost and a fixed cost.
a.
True
b.
False
Chapter 11
18. Rental charges of $60,000 per year plus $2 for each machine hour over 15,000 hours is an example of a fixed cost.
a.
True
b.
False
19. A rental cost of $40,000 plus $0.50 per machine hour of use is an example of a mixed cost.
a.
True
b.
False
Chapter 11
20. The fixed cost per unit varies with changes in the level of activity.
a.
True
b.
False
21. For purpose of analysis, mixed costs can generally be separated into their variable and fixed components.
a.
True
b.
False
Chapter 11
22. The contribution margin ratio is the same as the variable cost ratio.
a.
True
b.
False
23. Variable costs as a percentage of sales is equal to 100% minus the contribution margin ratio.
a.
True
b.
False
Chapter 11
24. If sales total $2,000,000, fixed costs total $600,000, and variable costs are 60% of the sales, the contribution margin
ratio is 40%.
a.
True
b.
False
25. If sales total $1,000,000, fixed costs total $200,000, and variable costs are 55% of the sales, the contribution margin
ratio is 55%.
a.
True
b.
False
Chapter 11
26. If sales total $5,000,000, fixed costs total $400,000, and variable costs are 2,750,000, the contribution margin ratio is
45%.
a.
True
b.
False
27. The unit contribution margin is the dollars available from each unit of sales to cover fixed cost and provide operating
income.
a.
True
b.
False
Chapter 11
28. The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating
income is termed as contribution margin ratio.
a.
True
b.
False
29. The break-even point (in units) is calculated by dividing the total estimated fixed costs by the net sales of a period.
a.
True
b.
False
Chapter 11
30. The point in operations at which revenues and expenses are exactly equal is called the break-even point.
a.
True
b.
False
31. Break-even analysis is a type of cost-volume-profit analysis.
a.
True
b.
False
Chapter 11
32. A change in fixed costs as a result of increase in the property tax rates will increase the break-even point.
a.
True
b.
False
33. A change in fixed costs as a result of increase in yearly insurance premium will decrease the break-even point.
a.
True
b.
False
Chapter 11
34. If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.
a.
True
b.
False
35. If direct materials cost per unit increases, the break-even point will increase.
a.
True
b.
False
Chapter 11
36. If direct materials cost per unit decreases, the break-even point will increase.
a.
True
b.
False
37. If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will
decrease.
a.
True
b.
False
Chapter 11
38. If fixed costs are $300,000 and variable costs are 70% of break-even sales, profit is zero when sales revenue is
$1,000,000.
a.
True
b.
False
39. If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold.
a.
True
b.
False
Chapter 11
40. If fixed costs are $220,000 and the unit contribution margin is $25, the sales necessary to earn an operating income of
$30,000 are 10,000 units.
a.
True
b.
False
41. If fixed costs are $450,000 and the unit contribution margin is $50, the sales necessary to earn an operating income of
$30,000 are 14,000 units.
a.
True
b.
False
