Financial and Managerial Accounting: The Basis for Business Decisions, 12/e

Jan R. Williams, University of Tennessee
Susan F. Haka, Michigan State University
Mark S. Bettner, Bucknell University
Robert F. Meigs

Cost-Volume-Profit Analysis

Multiple Choice Quiz

Please answer all questions


1	Which of the following average costs per unit may be expected to decrease by the greatest percentage with an increase in the volume of units produced?
		A)	Average fixed cost per unit.
		B)	Average semivariable cost per unit.
		C)	Average variable cost per unit.
		D)	Average total cost per unit.


2	Within the relevant range of production, average variable cost per unit tends to:
		A)	Fluctuate drastically.
		B)	Vary inversely with the level of production.
		C)	Vary directly and proportionately with the level of production.
		D)	Remain relatively constant.


3	Which of the following does not apply to a company's contribution margin?
		A)	It is the amount of revenue left over after fixed and variable costs have been paid.
		B)	It may be expressed in total dollars or on a per-unit basis.
		C)	Part of it provides the company's operating profit.
		D)	Expressed as a percentage of sales, it is called the contribution margin ratio.


4	Snyder Corporation, which produces and sells a single product, recently experienced an increase in fixed costs relating to depreciation on new equipment. If variable costs and sales price remain unchanged, what will happen to contribution margin and the break even point.
		A)	Contribution margin will increase and the break even point will decrease.
		B)	Contribution margin will decrease and the break even point will increase.
		C)	Contribution margin will be unchanged and the break even point will increase.
		D)	Contribution margin will be unchanged and the break even point will decrease.

Use the following data for questions 5 through 7.

The following information is available regarding the total manufacturing overhead of Peterson Company for a recent four-month period.


5	Refer to the above information. Using the high-low method, compute the variable element of manufacturing overhead cost per direct labor hour.
		A)	$0.71 per direct labor hour.
		B)	$2.27 per direct labor hour.
		C)	$1.40 per direct labor hour.
		D)	$2.31 per direct labor hour.


6	Refer to the above information. Using the high-low method, compute the fixed element of Peterson's monthly overhead cost.
		A)	$185,000.
		B)	$87,000.
		C)	$98,000.
		D)	$140,000.


7	Refer to the above information. Peterson's projected September operations will require approximately 120,000 direct labor hours. Using the high-low method, compute total manufacturing overhead estimated for September.
		A)	$272,400.
		B)	$317,143.
		C)	$255,000.
		D)	$168,000.

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