Cost Behavior and Decisions using CVP

Question 1

Sales Revenue depends on

Answer 1

Number of Units sold
Selling Price per unit
Mix of items sold

Question 2

Variable Cost depends on

Answer 2

Number of units sold
Variable cost per unit
Mix of items sold

Question 3

Fixed cost depends on

Answer 3

Management choice of the level of fixed costs; does not depend on the number of units sold.

Question 4

Stepped Cost

Answer 4

increases with the level of activity but in steps instead of smoothly. If the steps are wide, the cost is treated as a fixed cost; if the steps are narrow, the cost is approximated as a variable cost.

Question 5

What is the slope of the total cost line

Answer 5

Variable cost per unit

Question 6

What is the slope of the revenue line

Answer 6

Selling price per unit

Question 7

What do high fixed costs and low variable costs do to operating leverage?

Answer 7

indicate high operating leverage

Question 8

What do low fixed costs and high variable costs do to operating leverage?

Answer 8

Indicate low operating leverage.