Financial And Managerial Accounting Ch 5 Flashcards
The relevant range is:
a. The range of activity in which variable costs will be curvilinear
b. The range of activity in which fixed costs will be curvilinear
c. The range over which the company expects to operate during a year
d. Usually from zero to 100% of operating capacity
The relevant range is:
c. The range over which the company expects to operate during a year
Kendra NV’s total utility cost during the past year were 1200 EUR during its highest month and 600 EUR during its lowest month. These costs corresponded with 10 000 units of production during the high month and 2000 units during the low month. What are the fixed and variable components of its utility costs using the high-low method?
a. 0,075 variable and 450 fixed
b. 0,120 variable and 0 fixed
c. 0,300 variable and 0 fixed
d. 0,060 variable and 600 fixed
Kendra NV’s total utility cost during the past year were 1200 EUR during its highest month and 600 EUR during its lowest month. These costs corresponded with 10 000 units of production during the high month and 2000 units during the low month. What are the fixed and variable components of its utility costs using the high-low method?
a. 0,075 variable and 450 fixed
Step 1: determine variable costs per unit change in:
change in total costs / high - low activity level = variable cost per unit
(1200 - 600) / (10000 - 2000) = 0,075
Step 2: determine fix costs. Substract the total variable cost at either the high or the low activity level from the total cost at that activity level:
1200 - (0,075 x 10000) = 450
Lanza SA had actual sales of 600 000 USD when break-even sales were 420 000 USD. What is the margin of safety ratio?
a. 25%
b. 30%
c. 33 ⅓%
d. 45%
Lanza SA had actual sales of 600 000 USD when break-even sales were 420 000 USD. What is the margin of safety ratio?
b. 30%
margin of safety in EUR = actual (expected) sales - break-even sales
margin of safety in EUR = 600 000 - 420 000 = 180 000
margin of safety ratio = margin of safety in EUR / actual (expected) sales
margin of safety ratio = 180 000 / 600 000 = 30%
Lucy expects to produce and sell 9,000 units at £20 each. Each unit will cost her £8 a unit to produce and fixed costs will be £50,000 per annum. What is the break-even point in units?
Lucy expects to produce and sell 9,000 units at £20 each. Each unit will cost her £8 a unit to produce and fixed costs will be £50,000 per annum. What is the break-even point in units?
Answer: 4167
break-even point in units = fixed costs / contribution margin per unit
break-even point in units = 50 000 / (20 - 8) = 4167
Toby is arranging for a rock concert to be held in the students union. The use of the hall will be free but security costs of £100 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £150. Tickets will be priced at £11 each. How many tickets is the break-even point for this event?
Toby is arranging for a rock concert to be held in the students union. The use of the hall will be free but security costs of £100 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £150. Tickets will be priced at £11 each. How many tickets is the break-even point for this event?
Answer: 250
Contribution margin:
a. Is revenue remaining after deducting variable costs
b. May be expressed as contribution margin per unit
c. Is selling price less cost of goods sold
d. Both (a) and (b) above
Contribution margin:
d. Both (a) and (b) above
a. Is revenue remaining after deducting variable costs
b. May be expressed as contribution margin per unit
Which of the following is the most secure margin of safety for a business to have?
a. A margin of safety of 3,000 units and a percentage margin of safety of 30%
b. A margin of safety of 3,000 units and a percentage margin of safety of 25%.
c. A margin of safety of 300 units and a percentage margin of safety of 35%
d. A margin of safety of 300 units and a percentage margin of safety of 20%
Which of the following is the most secure margin of safety for a business to have?
c. A margin of safety of 300 units and a percentage margin of safety of 35% The most secure margin of safety is the one with the highest percentage margin of safety.
The mathematical equation for computing required sales to obtain target net income can be expressed as Required sales =
a. Variable costs + target net income
b. Variable costs + fixed costs + target net income
c. Fixed costs + target net income
d. No correct answer is given
The mathematical equation for computing required sales to obtain target net income can be expressed as Required sales =
b. Variable costs + fixed costs + target net income
Variable costs are costs that:
a. Vary in total directly and proportionately with changes in the activity level
b. Remain the same per unit at every activity level
c. Neither of the above
d. Both (a) and (b) above
Variable costs are costs that:
d. Both (a) and (b) above
a. Vary in total directly and proportionately with changes in the activity level
b. Remain the same per unit at every activity level
Toby is arranging for a rock concert to be held in the students union. The use of the hall will be free but security costs of £100 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £150. Tickets will be priced at £11 each. If Toby sells 500 tickets as he anticipates, what profit will this event make?
Toby is arranging for a rock concert to be held in the students union. The use of the hall will be free but security costs of £100 will have to be met. The cost of the main band will be £2,500 and the supporting band will cost £150. Tickets will be priced at £11 each. If Toby sells 500 tickets as he anticipates, what profit will this event make?
Answer: 2750
Which of the following definitions of break-even point is correct?
a. The break-even point is where total revenue equals total fixed costs plus variable costs.
b. The break-even point is where total fixed costs equals total variable costs.
c. The break-even point is where total sales revenue equals total contribution.
d. The break-even point is where total revenue equals total fixed costs less variable costs.
Which of the following definitions of break-even point is correct?
a. The break-even point is where total revenue equals total fixed costs plus variable costs.
Your cell phone service provider offers a plan that is classified as a mixed cost. The cost per month for 1000 minutes is 50 EUR. If you use 2000 minutes this month, your cost will be:
a. 50 EUR
b. 100 EUR
c. More than 100 EUR
d. Between 50 and 100 EUR
Your cell phone service provider offers a plan that is classified as a mixed cost. The cost per month for 1000 minutes is 50 EUR. If you use 2000 minutes this month, your cost will be:
d. Between 50 and 100 EUR
Your costs will include the fixed-cost component (flat-service fee) which does not increase plus the variable cost (usage charge) for the additional 1000 minutes which will increase your cost to between 50 and 100 EUR. Therefore the other choices are incorrect.
Gaby is planning to produce and sell baseball hats for Toby’s concert. She expects to produce and sell 300 at a selling price of £8 each. Her break-even point is 213 hats. What is her margin of safety, as a percentage?
Gaby is planning to produce and sell baseball hats for Toby’s concert. She expects to produce and sell 300 at a selling price of £8 each. Her break-even point is 213 hats. What is her margin of safety, as a percentage?
Answer: 29%
If the contribution per unit is £15 and the breakeven point is 60,000 units. Which of the following statements could NOT be true?
a. To make a profit of £300,000, then 80,000 units would have to be sold.
b. To make a profit of £500,000, then 100,000 units would have to be sold.
c. The selling price per unit is £55 and the variable cost per unit is £40
d. The fixed costs are £900 000
If the contribution per unit is £15 and the breakeven point is 60,000 units. Which of the following statements could NOT be true?
b. To make a profit of £500,000, then 100,000 units would have to be sold. Profit at 100,000 units is (£15 x 100,000) - 900,000 = £600,000.
Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?
a. $100,000
b. $160,000
c. $200,000
d. $300,000
Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?
c. $200,000
fixed costs / contribution margin ratio = break-even point in EUR
fixed costs / 25% = ($4 x 200,000)
fixed costs = 800 000 x 25%
fixed costs = 200 000
Mixed costs consist of a:
a. Variable cost element and a fixed cost element
b. Fixed cost element and a controllable cost element
c. Relevant cost element and a controllable cost element
d. Variable cost element and a relevant cost element
Mixed costs consist of a:
a. Variable cost element and a fixed cost element
Gaby is planning to produce and sell baseball hats for Toby’s concert. She expects to produce and sell 300 at a selling price of £8 each. Her breakeven point is 213 hats. To produce the hat, the following costs will be incurred: Fabric: £3 per hat Labour costs/hour: £8 per hour Rent of premises: £460 per annum Insurance: £180 per annum Each hat will take a carpenter 15 minutes to make. Which of the following statements is true?
a. The variable cost per unit will be £11 and fixed costs will be £640.
b. The variable cost per unit will be £5 and fixed costs will be £640.
c. The variable cost per unit will be £5 and fixed costs will be £460.
d. The variable cost per unit will be £11 and fixed costs will be £460.
Gaby is planning to produce and sell baseball hats for Toby’s concert. She expects to produce and sell 300 at a selling price of £8 each. Her breakeven point is 213 hats. To produce the hat, the following costs will be incurred: Fabric: £3 per hat Labour costs/hour: £8 per hour Rent of premises: £460 per annum Insurance: £180 per annum Each hat will take a carpenter 15 minutes to make. Which of the following statements is true?
b. Variable cost: £3 plus £8/4 = £5; fixed cost: £460 plus £180 = £640.
Cournot AG sells 100 000 wrenches CHF12 a unit. Fixed costs are CHF300 000 and net income is CHF200 000. What should be reported as variable expenses in the CVP income statement?
a. CHF700 000
b. CHF900 000
c. CHF500 000
d. CHF1 000 000
Cournot AG sells 100 000 wrenches CHF12 a unit. Fixed costs are CHF300 000 and net income is CHF200 000. What should be reported as variable expenses in the CVP income statement?
a. CHF700 000
Which of the following costs would be a fixed cost for Shaun, a knitwear manufacturer?
a. Labels and packaging
b. Labour cost: knitting machine operators
c. Factory rent
d. Purchasing wool
Which of the following costs would be a fixed cost for Shaun, a knitwear manufacturer?
c. Factory rent
The mathematical equation for computing required sales to obtain target net income is: Required sales =
a. Variable costs + Target net income
b. Variable costs + Fixed costs + Target net income
c. Fixed costs + Target net income
d. No correct answer is given
The mathematical equation for computing required sales to obtain target net income is: Required sales =
b. Variable costs + Fixed costs + Target net income = required sales
Margin of safety can be computed as:
a. Actual sales - break-even sales
b. Contribution margin - fixed costs
c. Break-even sales - variable costs
d. Actual sales - contribution margin
Margin of safety can be computed as:
a. Actual sales - break-even sales
Which of the following most accurately describes a fixed cost?
a. A fixed cost is not affected by inflation.
b. A fixed cost involves the purchase of non-current assets.
c. A fixed cost remains the same, regardless of the level of output.
d. A fixed cost remains the same from year to year.
Which of the following most accurately describes a fixed cost?
c. A fixed cost remains the same, regardless of the level of output.
Which of the following is not involved in CVP analysis?
a. Sales mix.
b. Unit selling prices.
c. Fixed costs per unit.
d. Volume or level of activity.
Which of the following is not involved in CVP analysis?
c. Fixed costs per unit. Total fixed costs are taken into account
Tanaya Company’s contribution margin ratio is 30%. It Tanaya’s sales revenue is Rp 10 000 greater than its break-even sales in rupiah, its net income:
a. Will be Rp 10 000
b. Will be Rp 7000
c. Will be Rp 3000
d. Cannot be determined without knowing fixed costs
Tanaya Company’s contribution margin ratio is 30%. It Tanaya’s sales revenue is Rp 10 000 greater than its break-even sales in rupiah, its net income:
c. Will be Rp 3000 (Rp 10 000 x 30%)
