Cost Exam 2 (Ch. 5-7)

Question 1

CVP analysis focuses on how profits are affected by what 5 variables?

Answer 1

Selling prices
Sales volume
Unit variable costs
Total fixed costs
Product mix

Question 2

What 3 things does CVP analysis identify?

Answer 2

Break-even points
Profits
Losses

Question 3

As sales increase, total costs and volume increase. This is the _____ graph.

Answer 3

total revenue

Question 4

As sales increase, variable costs and volume increase. This is the _____ graph.

Answer 4

total variable cost

Question 5

As sales increase, fixed costs stay the same and volume increases. This is the _____ graph.

Answer 5

total fixed cost

Question 6

The total cost graph consists of the ____ graph stacked on top of the _____ graph.

Answer 6

total variable cost, total fixed cost

Question 7

On the CVP graph, the break-even point is where the ______ graph intersects the _____ graph.

Answer 7

total revenue, total cost

Question 8

As fixed costs increase, the break-even point increases/decreases.

Answer 8

Increases

Question 9

As the sales price increases, the break-even point increases/decreases.

Answer 9

Decreases

Question 10

As the variable cost per unit increases, the break-even point increases/decreases.

Answer 10

increases

Question 11

What are the components of an absorption costing income statement?

Answer 11

Sales - COGS = GP

GP - Operating Expenses = Operating Income

Question 12

What are the components of COGS in absorption costing?

Answer 12

DM, DL, FOH

Question 13

What are the components of a variable costing income statement?

Answer 13

Sales - variable costs = contribution margin

Contribution margin - fixed costs = operating income

Question 14

What is manufacturing margin?

Answer 14

Sales - variable manufacturing cost

Question 15

When all products that are produced are sold, how does operating income for absorption costing compare to variable costing?

Answer 15

They are equal

Question 16

When not all of the products produced are sold, how does operating income for absorption costing compare to variable costing?

Answer 16

Absorption costing income is greater than variable costing

Question 17

When more products are sold than produced, how does operating income for absorption costing compare to variable costing?

Answer 17

Variable costing income is greater than absorption costing

Question 18

Why causes the difference in operating income between absorption and variable costing?

Answer 18

Fixed manufacturing overhead costs are tied to inventory in absorption costing, but are treated as an expense in variable costing.

Question 19

Under the Theory of Constraints, some companies treat ____ as a fixed manufacturing cost rather than a variable cost.

Answer 19

direct labor

Question 20

____ fixed costs are incurred because of the existence of a segment.

Answer 20

Traceable

Question 21

____ fixed costs support more than one segment.

Answer 21

common

Question 22

What is segment margin?

Answer 22

Segment contribution margin - traceable fixed costs

Question 23

Which costing method is better for heterogeneous products? Traditional or activity-based?

Answer 23

Activity-based

Question 24

Which costing method could result in inaccurate pricing? Traditional or activity-based?

Answer 24

Traditional

Question 25

In activity-based costing, organization sustaining products are treated as ____ costs.

Answer 25

period

Question 26

In activity-based costing, costs not tied to a product are treated as ____ costs.

Answer 26

period

Question 27

Which costing method assigns all factory overhead to products, even if the costs are not tied to the products? Traditional or activity-based?

Answer 27

Traditional