Accounting 202 - Chapter 6

28 Questions  I  By Jc173
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Accounting Quizzes & Trivia
Cost Behavior

  
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Questions and Answers

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  • 1. 
    Which of the following statements is TRUE with respect to variable costs per unit?
    • A. 

      They will decrease as production increases within the relevant range

    • B. 

      They will increase as production decreases within the relevant range

    • C. 

      They will remain the same as production levels change within the relevant range

    • D. 

      They will decrease as production decreases within the relevant range


  • 2. 
    Which of the following statements is TRUE with respect to total variable costs?
    • A. 

      They will remain the same as production levels change within the relevant range.

    • B. 

      They will decrease as production increases within the relevant range.

    • C. 

      They will decrease as production decreases within the relevant range.

    • D. 

      They will increase as production decreases within the relevant range.


  • 3. 
    Which of the following statements is TRUE with respect to total fixed costs?
    • A. 

      They will increase as production decreases within the relevant range.

    • B. 

      They will remain the same as production levels change within the relevant range.

    • C. 

      They will decrease as production increases within the relevant range.

    • D. 

      They will decrease as production decreases within the relevant range.


  • 4. 
    Within the relevant range, which of the following statements is TRUE with respect to fixed costs per unit?
    • A. 

      They will increase as production increases.

    • B. 

      They will decrease as production decreases.

    • C. 

      They will increase as production decreases.

    • D. 

      They will remain the same as production levels change.


  • 5. 
    Which of the following is a fixed cost?
    • A. 

      Direct materials cost

    • B. 

      Direct labor cost

    • C. 

      Sales commissions expense

    • D. 

      Straight-line depreciation expense


  • 6. 
    Which of the following statements describes variable costs?
    • A. 

      They are fixed per unit and vary in total.

    • B. 

      They are fixed in total.

    • C. 

      They vary per unit of output.

    • D. 

      They decrease per unit as production volume increases.


  • 7. 
    Renting a car and paying $15 per day plus $.03 per mile driven is an example of what type of cost?
    • A. 

      Conversion cost

    • B. 

      Fixed cost

    • C. 

      Mixed cost

    • D. 

      Variable cost


  • 8. 
    For most businesses, annual straight line depreciation expense on the company’s building is what type of cost?
    • A. 

      Variable

    • B. 

      Fixed

    • C. 

      Mixed

    • D. 

      Step


  • 9. 
    Which of the following would be considered a discretionary fixed cost?
    • A. 

      Property taxes and insurance

    • B. 

      Depreciation

    • C. 

      Employees wages

    • D. 

      Advertising


  • 10. 
    Which of the following would be considered a committed fixed cost?
    • A. 

      Research and Development

    • B. 

      Depreciation

    • C. 

      Office holiday party

    • D. 

      Advertising


  • 11. 
    Management has little or no control over:
    • A. 

      Committed fixed costs.

    • B. 

      Discretionary fixed costs.

    • C. 

      All fixed costs.

    • D. 

      Any of the above.


  • 12. 
    Which of the following cost behaviors cannot be accurately represented by a single straight line?
    • A. 

      Step costs

    • B. 

      Mixed costs

    • C. 

      Fixed costs

    • D. 

      Variable costs


  • 13. 
    When predicting costs at different volumes, managers should consider which of the following?
    • A. 

      The relevant range of the cost

    • B. 

      The type of cost behavior

    • C. 

      Neither of the above

    • D. 

      Both of the above


  • 14. 
    Using account analysis, what type of cost is utilities if you are charged $40 for the first 200 kilowatts hours, $85 for 201- 400 kilowatt hours, and $135 + or - for 401-600 kilowatt hours?
    • A. 

      Fixed

    • B. 

      Mixed

    • C. 

      Step

    • D. 

      Variable


  • 15. 
    Using account analysis, what type of cost is the local phone service which charges a flat fee for unlimited local calls?
    • A. 

      Fixed

    • B. 

      Mixed

    • C. 

      Step

    • D. 

      Variable


  • 16. 
    Using account analysis, what type of cost is Satellite TV when the charge is $30.00 per month plus $3.99 for pay-per-view movies?
    • A. 

      Fixed

    • B. 

      Mixed

    • C. 

      Step

    • D. 

      Variable


  • 17. 
    Manufacturing overhead is usually what type of cost?
    • A. 

      Variable

    • B. 

      Fixed

    • C. 

      Mixed

    • D. 

      Step


  • 18. 
    When managers use their judgment to classify costs as variable, fixed, or mixed, which method are they using?
    • A. 

      Account analysis

    • B. 

      High-low method

    • C. 

      Regression analysis

    • D. 

      Low-high method


  • 19. 
    The data points with the________ and the ________ should be selected for use in the high-low method.
    • A. 

      Highest volume; the lowest volume

    • B. 

      Highest cost; the lowest cost

    • C. 

      Highest volume; the lowest cost

    • D. 

      Highest cost; the lowest volume


  • 20. 
    A regression equation’s fixed cost component is represented by the__________ on the regression analysis output.
    • A. 

      Intercept coefficient

    • B. 

      X variable 1 coefficient

    • C. 

      R-square

    • D. 

      Residual


  • 21. 
    When predicting costs at other volumes using a cost equation derived from either the high-low method or regression analysis, managers should consider:
    • A. 

      Outliers

    • B. 

      General inflation

    • C. 

      Seasonality

    • D. 

      All of the above


  • 22. 
    On a traditional income statement, sales revenue less cost of goods sold equals:
    • A. 

      Contribution margin

    • B. 

      Gross profit

    • C. 

      Operating income

    • D. 

      Operating expenses


  • 23. 
    Traditional income statements organize costs by:
    • A. 

      Function

    • B. 

      Behavior

    • C. 

      Discretionary vs. committed

    • D. 

      No particular manner. Costs are listed in any order


  • 24. 
    The contribution margin is equal to:
    • A. 

      Sales minus cost of goods sold

    • B. 

      Sales minus variable expenses

    • C. 

      Sales minus fixed expenses

    • D. 

      Sales minus operating expenses


  • 25. 
    Cotown Corporation has total sales revenues of $300,000.  If their total fixed costs are $50,000 and their total variable costs are $175,000, the contribution margin is:
    • A. 

      $125,000

    • B. 

      $475,000

    • C. 

      $225,000

    • D. 

      $250,000


  • 26. 
    On a contribution margin income statement, all fixed costs are listed:
    • A. 

      Above the contribution margin line

    • B. 

      Above the gross profit line

    • C. 

      Below the contribution margin line

    • D. 

      Below the gross profit line


  • 27. 
    On a contribution margin income statement, all variable costs are listed:
    • A. 

      Above the contribution margin line

    • B. 

      Above the gross profit line

    • C. 

      Below the contribution margin line.

    • D. 

      Below the gross profit line


  • 28. 
    Zucca Company has a contribution margin per unit of $54.  If 6,000 more items are sold, and fixed expenses remain the same, the net change in operating income will be:
    • A. 

      $(324,000)

    • B. 

      $324,000

    • C. 

      $111

    • D. 

      $6,000


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