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Chapter 12 & 16S

Managerial accounting, as compared to financial accounting
uses frequent and prompt control reports.
The scattergram allows cost-volume relationships to be visually scanned for outlier observations that should be
ignored in the calculation of the cost formula of a mixed cost
Knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes
the effect on net income will depend on the behavior pattern of various costs.
The concept of operating leverage refers to which of the following?
Operating income changes proportionately more than revenues for any given change in activity level.
Managerial accounting can best be described as
the preparation and use of accounting information within the organization
As the level of activity decreases
fixed cost remains constant in total.
When a cost formula is used to describe a mixed (semi-variable) cost behavior pattern, total costs are expected to increase and per unit costs are expected to
remain constant as the level of activity increases.
As the total volume of activity changes
the total of variable costs changes
________ costs between two alternative projects are those that would result from selecting one alternative instead of the other
Relevant costs in decision-making:
are future costs that represent differences between decision alternatives
Performance analysis in the planning and control cycle relates to the act of
Each of a company’s two product lines has a different contribution margin ratio. If the company’s total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio, which of the following is true?
The average contribution margin ratio will increase.
The break-even point will decrease.
Operating income will increase.
A management decision that would have a long term influence on the operating leverage of a firm would be
substituting robots for hourly paid production workers
ABU Co. has several products, each with a different contribution margin ratio. If the same number of units were sold in July as in June, but the sales mix changed
total contribution margin in July would be different from that in June
The term “relevant range” refers to
the range of activity where cost relationships are valid
Which of the following is another term for mixed costs?
Semivariable costs
An example of a cost likely to have a mixed behavior pattern is
electricity cost for the manufacturing plant
A _____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned.
target cost
Opportunity costs are
foregone benefits
To which function of management is CVP analysis most applicable?
The contribution margin format income statement is organized by
Cost behavior classifications
Managerial accounting, as opposed to financial accounting, is primarily concerned with
Present and future planning and control
An income statement organized by cost behavior does not include
gross profit
Simplifying assumptions made when using cost behavior pattern data include
relevant range and linearity
In a make or buy decision, which of the following costs would be considered relevant?
avoidable costs
When the high-low method of estimating a cost behavior pattern is used
cost and volume data must be reviewed for outliers
When the firm’s activity requires it to operate at a level above the upper boundary of the relevant range, fixed expenses are likely to
Expressing fixed costs on a per unit basis of activity is misleading because
fixed cost per unit decrease as activity increases.
Which of the following statements does not describe a characteristic of management accounting?
Management accounting must conform to GAAP.
A sunk cost is a cost that
has been incurred and cannot be eliminated.
is never relevant in decision-making.
is never a differential cost.
An example of a cost that is likely to have a variable behavior pattern is
production labor wages
Cost behavior refers to
costs that are variable or fixed
Which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization?
Unavoidable costs

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