If fixed costs are $200,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?
Cost behavior refers to the manner in which
a cost changes as the related activity changes
The three most common cost behavior classifications are
fixed costs, variable costs, mixed costs
Costs that remain constant in total dollar amount as the level of activity changes are called
Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?
salary of a factory supervisor
Which of the following describes the behavior of the fixed cost per unit?
decreases with increasing total production
Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service such as United Postal Service?
number of miles driven
Most operating decisions of management focus on a narrow range of activity called the
relevant range of production
Costs that vary in total in direct proportion to changes in an activity level are called
Which of the following is an example of a cost that varies in total as the number of units produced changes?
direct materials costs
Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?
insurance premiums on factory building
Which of the following costs is a mixed cost?
rental cost of $5,000 per month plus $.30 per machine hour of use
Which of the following statements is true regarding fixed and variable costs?
fixed costs are constant in total; variable costs are constant per unit
Knowing how costs behave is useful to management for all of the following reasons except for
predicting customer demand
the systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed
Contribution margin is
the excess of sales revenue over variable costs
What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
contribution margin ratio
A formal written statement of management’s plans for the future expressed in financial terms is a
the budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit’s performance is know as a
When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing
Which of the following budgets allow for adjustments in activity levels?
The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as
zero based budgeting
A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed
The budget that needs to be completed first when preparing the master budget is the
Which of the following budgets should be coordinated with the preparation of the direct labor cost budget?
The budget that summarizes future plans for the acquisition of fixed assets is the
capital expenditures budget
Estimated cash payments are planned reductions in cash from all of the following except (Hint: Remember, this is about actual cash payments, not cash receipts.)
notes payable and accounts receivable collections
The operating budgets of a company include
the production budget
When preparing the cash budget, all of the following should be considered except:
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