Chapter 21: Cost Behavior And Cost-Volume-Profit

Question 1

Activity bases

Answer 1

The activities that causes the cost to change

Question 2

Relevant range

Answer 2

The range of activity over which the changes in the cost are of interest

Question 3

 Direct materials and direct labor costs are normally classified as this with the activity base is units produced

Answer 3

Variable costs

Question 4

When the activity base is units produced, many of this are classified as fixed costs.

Answer 4

Factory overhead costs

Question 5

 The high-low method is what?

Answer 5

A cost estimation method that may be used to separate variable and fixed in mixed costs.

Question 6

Variable cost per unit =

Answer 6

Difference in total cost / difference in units produced

Highest and lowest levels in mixed costs

Question 7

Fixed cost =

Answer 7

Total costs - (variable cost per unit * units produced)

Question 8

Nerve variable costing, only what are included in the production cost?

Answer 8

Direct materials, Direct labor, and variable factory overhead ( variable manufacturing costs)

Question 9

Contribution margin =

Answer 9

Sales-variable costs

Question 10

Contribution margin ratio =

Answer 10

Contribution margin / sales

Question 11

Change in income from Operations =

Answer 11

Change in sales dollars * contribution margin ratio

Question 12

Unit contribution margin =

Answer 12

Sales price per unit - variable cost per unit

Question 13

Change in income from Operations (units) =

Answer 13

Change in sales units * Unit contribution margin

Question 14

Fixed cost / Unit contribution margin

Answer 14

Break-even point

Question 15

Fixed Costs / contribution margin ratio

Answer 15

Break-even sales (dollars) =

Question 16

Contribution margin ratio =

Answer 16

Unit contribution margin / unit selling price

Question 17

Oh thanks cost may change due to what?

Answer 17

Changes in overhead costs

Question 18

 Unit variable costs may be affected by what?

Answer 18

Hey changes in the cost per unit of direct materials, changes in the wage rate for direct labor, why changes in the sales commission paid to salespeople

Question 19

Changes in the unit selling price affect the break even point by

Answer 19

Increases will increase the break even point, decreases or decrease the break even point

Question 20

Sales (units) required for target Profit =

Answer 20

 Fixed costs + Target Profit / unit contribution margin

Question 21

Sales (dollars) =

Answer 21

Fixed costs + target profit / Contribution margin ratio

Question 22

What is a cost-volume-profit chart?

Answer 22

Graph that shows sales, cost, and the related profit or loss for various levels of units sold

Question 23

 what is the profit-volume chart?

Answer 23

Graph that plots only the difference between total sales and total cost (or profits)

Question 24

 What primary assumptions does cost volume profit analysis depend on?

Answer 24

Total sales and total cost can be represented by straight lines
Within a relevant range of operating activity, the efficiency of operations does not change
Cost can be divided into fixed and variable components
Sales mix is constant
There is no change in the inventory quantities during the period

Question 25

Sales Mix is

Answer 25

The relative distribution of sales among the products sold by a company

Question 26

Unit selling price of the overall enterprise product =

Answer 26

Sum of the unit selling prices of each product * sales mix percentage

Question 27

Unit variable cost & unit contribution margin =

Answer 27

Sum of the unit variable cost & unit contribution margins of each product * Sales mix percentage

Question 28

Operating leverage =

Answer 28

Contribution margin / income from Operations

Question 29

 Fixed costs are

Answer 29

The difference between contribution margin & Income from Operations

Question 30

The effect of changes in sales on income from operations =

Answer 30

Percent change in sales * operating leverage

Question 31

This indicates the possible decrease in sales that may occur before an operating loss results

Answer 31

Margin of safety

Question 32

 Margin of safety (dollars) =

Answer 32

Sales - Sales at break even point

Question 33

Sales - Sales at break even point / unit selling price

Answer 33

Margin of safety (units)

Question 34

Margin of safety (percent) =

Answer 34

Sales - Sales at break even point / sales

Question 35

What is absorption costing?

Answer 35

Reporting of direct materials, direct labor, and factory overhead

Question 36

Manufacturing margin =

Answer 36

Sales - Variable cost of goods sold

Question 37

Contribution margin (variable costing) =

Answer 37

Manufacturing Margin - Variable selling and administrative expenses

Question 38

Income from operations (variable costing) =

Answer 38

Contribution - Fixed Costs