ACC 560 Week 5 Quiz – Strayer NEW

 

Week 5 Quiz 4: Chapters 5 and 6

 

Chapter 5

 

TRUE-FALSE STATEMENTS

    1.     An activity index identifies the activity that has a causal relationship with a particular cost.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    2.     A variable cost remains constant per unit at various levels of activity.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    3.     A fixed cost remains constant in total and on a per unit basis at various levels of activity.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    4.     If volume increases, all costs will increase.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    5.     If the activity index decreases, total variable costs will decrease proportionately.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    6.     Changes in the level of activity will cause unit variable and unit fixed costs to change in opposite directions.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    7.     For CVP analysis, both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    8.     The relevant range of activity is the activity level where the firm will earn income.

 

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

    9.     Costs will not change in total within the relevant range of activity.

 

Ans:, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  10.     The high-low method is used in classifying a mixed cost into its variable and fixed elements.

 

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  11.     A mixed cost has both selling and administrative cost elements.

 

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  12.     The fixed cost element of a mixed cost is the cost of having a service available.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  13.     For planning purposes, mixed costs are generally grouped with fixed costs.

 

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  14.     The difference between the costs at the high and low levels of activity represents the fixed cost element of a mixed cost.

 

Ans:, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  15.     When applying the high-low method, the variable cost element of a mixed cost is calculated before the fixed cost element.

 

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  16.     An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

 

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  17.     In CVP analysis, the term “cost” includes manufacturing costs, and selling and administrative expenses.

 

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  18.     Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  19.     Unit contribution margin is the amount that each unit sold contributes towards the recovery of fixed costs and to income.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  20.     The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  21.     Both variable and fixed costs are included in calculating the contribution margin.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  22.     A CVP income statement shows contribution margin instead of gross profit.

 

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  23.     The break-even point is where total sales equal total variable costs.

 

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  24.     The break-even point is where total sales equal total variable costs.

 

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  25.     The break-even point is equal to the fixed costs plus net income.

 

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  26.     If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

 

Ans:, LO: 6, Bloom: AP, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  27.     A target net income is calculated by taking actual sales minus the margin of safety.

 

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  28.     Target net income is the income objective for an individual product line.

 

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  29.     The margin of safety is the difference between sales at breakeven and sales at a determined activity level.

 

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  30.     The margin of safety is the difference between contribution margin and fixed costs.

 

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  31.     The activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  32.     The trend in most companies is to have more variable costs and fewer fixed costs.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  33.     For purposes of CVP analysis, mixed costs must be classified into their fixed and variable elements.

 

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  34.     The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

 

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics

 

  35.     A cost-volume-profit graph shows the amount of net income or loss at each level of sales.

 

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Business Economics

 

  36.     If variable costs per unit are 70% of sales, fixed costs are $290,000 and target net income is $70,000, required sales are $1,200,000.

 

Ans:, LO: 7, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

  37.     The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

 

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

 

MULTIPLE CHOICE QUESTIONS

  38.     For an activity base to be useful in cost behavior analysis,

a.   the activity should always be stated in dollars.

b.   there should be a correlation between changes in the level of activity and changes in costs.

c.   the activity should always be stated in terms of units.

d.   the activity level should be constant over a period of time.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  39.     A variable cost is a cost that

a.   varies per unit at every level of activity.

b.   occurs at various times during the year.

c.   varies in total in proportion to changes in the level of activity.

d.   may or may not be incurred, depending on management's discretion.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  40.     A cost which remains constant per unit at various levels of activity is a

a.   variable cost.

b.   fixed cost.

c.   mixed cost.

d.   manufacturing cost.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

 

  41.     Two costs at Bradshaw Company appear below for specific months of operation.

                                Month           Amount          Units Produced

Delivery costs       September       $  40,000                40,000

                              October               55,000                60,000

Utilities                 September       $  84,000                40,000

                              October             126,000                60,000

Which type of costs are these?

a.   Delivery costs and utilities are both variable.

b.   Delivery costs and utilities are both mixed.

c.   Utilities are mixed and delivery costs are variable.

d.   Delivery costs are mixed and utilities are variable.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Quantitative Methods

 

  42.     An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:

      Unit Variable Cost            Unit Fixed Cost

a.   Increases                           Decreases

b.   Remains constant              Remains constant

c.   Decreases                          Remains constant

d.   Remains constant              Decreases

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  43.     A fixed cost is a cost which

a.   varies in total with changes in the level of activity.

b.   remains constant per unit with changes in the level of activity.

c.   varies inversely in total with changes in the level of activity.

d.   remains constant in total with changes in the level of activity.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  44.     Fixed costs normally will not include

a.   property taxes.

b.   direct labor.

c.   supervisory salaries.

d.   depreciation on buildings and equipment.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  45.     The increased use of automation and less use of the work force in companies has caused a trend towards an increase in

a.   both variable and fixed costs.

b.   fixed costs and a decrease in variable costs.

c.   variable costs and a decrease in fixed costs.

d.   variable costs and no change in fixed costs.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Technology, AICPA BB: Industry/Sector Perspective, AICPA FN: Leverage Technology, AICPA PC: None, IMA: Business Economics

 

 

  46.     Cost behavior analysis is a study of how a firm's costs

a.   relate to competitors' costs.

b.   relate to general price level changes.

c.   respond to changes in the level of business activity.

d.   respond to changes in the gross national product.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  47.     Cost behavior analysis applies to

a.   retailers.

b.   wholesalers.

c.   manufacturers.

d.   all entities.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  48.     If a firm increases its activity level,

a.   costs should remain the same.

b.   most costs will rise.

c.   no costs will remain the same.

d.   some costs will change, others will remain the same.

 

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  49.     An activity index might be referred to as a cost

a.   driver.

b.   multiplier.

c.   element.

d.   correlation.

 

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: None, IMA: Business Economics

 

  50.     Cost activity indexes might help classify costs as

a.   temporary.

b.   permanent.

c.   variable.

d.   transient.

 

Continued................

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ACC 560 Week 5 Quiz – Strayer NEW

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