Problem 1. The cost of a single unit of production in excess of the breakeven point in units is:
A) its fixed cost and variable cost.
B) its fixed cost only.
C) its variable cost only.
D) none of the above.
Problem 2. What percentage of the contribution margin is profit on units sold in excess of the breakeven point?
A) It's 50% to the contribution margin ratio.
B) It's equal to the variable cost ratio.
C) It's equal of the gross profit ratio.
D) It's 100%.
Problem 3. Which of the following is a true statement regarding absorption and/or direct costing?
A) A firm can choose to use either absorption or direct costing for income tax purposes.
B) A firm can choose to use either absorption or direct costing for financial reporting purposes.
C) Direct costing assigns only direct materials and direct labor to products.
D) Absorption costing includes fixed overhead in product costs whereas direct costing does not.
E) None of the above.
Problem 4. An example of a product cost is:
A) advertising expense for the product.
B) a portion of the president's travel expenses.
C) interest expense on a loan to finance inventory.
D) production line maintenance costs.
Problem 5. The production cost of a single unit of a manufactured product is determined by:
A) dividing total direct materials and direct labor for a production run by the number of units made.
B) dividing total direct materials, direct labor, and manufacturing overhead for a production run by the number of units made.
C) dividing total direct materials, direct labor, manufacturing overhead and selling expenses for a production run by the number of units made.
D) dividing the selling price by the gross profit ratio.
Problem 6. An example of a cost that is likely to have a variable behavior pattern is:
A) sales force salaries.
B) depreciation of production equipment.
C) salaries of production supervisors.
D) direct labor costs.
Problem 7. An example of a cost likely to have a fixed behavior pattern is:
A) sales force commission.
B) raw material costs.
C) advertising costs.
D) electricity costs for packaging equipment.
Problem 8. Which of the following is not a strong reason for budgeting?
A) Budgets provide a benchmark for judging performance.
B) Budgeting requires little effort by non-accounting managers.
C) Budgeting requires management to plan.
D) Budgeting requires coordination among the functional areas of the firm.
Problem 9. The cash budget is especially important to a firm when:
A) there is not a lot of confidence in the sales forecast.
B) it has a relatively large amount of operating cash.
C) the P/E ratio has been trending downwards.
D) it may have to negotiate a short-term bank loan.
Problem 10. Which of the following costs are included in the cost classification that is based on the relationship between total cost and volume of activity?
A) Variable cost and fixed cost.
B) Direct cost and indirect cost.
C) Product cost and period cost.
D) Committed cost and discretionary cost.
Problem 11. Which of the following is the last budgeted financial statement to be prepared?
A) Budgeted income statement.
B) Budgeted balance sheet.
C) Cash budget.
D) It doesn't matter which one is prepared last.