Deck 15: Cost Behaviour and Cost-Volume-Profit Analysis

Question 1

The graph above represents:

A) Variable costs
B) Marginal costs
C) Fixed costs
D) Semi variable costs

Answer 1

C

Question 2

Variable cost functions are in reality curvilinear not linear as we assume in Cost profit analysis.

Answer 2

True

Question 3

The graph above represents:

A) Variable costs
B) Semi variable costs
C) Stepped costs
D) Marginal costs

Answer 3

B

Question 4

A cost is a fixed cost if it only changes in relation to total sales revenue.

Question 5

The contribution margin is equal to the sales price per unit less the variable cost per unit.

Question 6

Total variable cost will increase and decrease in direct proportion to the increase and decrease in activity levels.

Question 7

The relevant range of activity is the levels of activity the firm has experienced in the past and is more confident to predict in the future.

Question 8

Which of the following descriptions describes contribution?

A) Revenue - total costs
B) Revenue - semi-variable costs
C) Revenue - variable costs
D) Revenue - fixed costs

Question 9

AJ Ltd is an motor car insurance broker. Staff are paid a fixed wage then a commission for each sale of car insurance completed. (a) (c) (b) (d) Which of the above graphs reflects AJ s labour costs?

A) Graph (a)
B) Graph (b)
C) Graph (c)
D) Graph (d)

Question 10

Martin Green owns a hairdressing shop. He employs 5 hairdressers. The list below shows some of the costs that he incurs: (i) Salaries of hairdressers (ii) Depreciation of chairs and equipment (iii) Lease on shop (iv) Rates Which of the costs can be regarded as variable in nature?

A) Non of them
B) All of them
C) (i) and (iii)
D) (ii) and (iv)

Question 11

Cost estimation relates to the ability for accountants to make estimates of the cost of future projects.

Question 12

The graph above represents:

A) Variable costs
B) Stepped costs
C) Fixed costs
D) Semi variable costs

Question 13

The independent variable is the cost to be predicted.

Question 14

A company manufactures and sells a single product. At the budget output of 1,000 units per week the cost per unit is: £ Variable costs 42 Fixed costs 30 Profit 48 Selling price 120 The breakeven point in sales revenue per week (to the nearest thousand pounds) is:

A) £40000
B) £46000
C) £62000
D) £75000

Question 15

In practice all costs can be divided in fixed and variable.

Question 16

Higgins Ltd manufactures a standard model of pressure cooker. The selling price of each pressure cooker is £45. Variable costs of manufacture are £10.70. During its 20X1 the company expects to incur fixed overheads of £110000. The sales director expects to sell 5000 pressure cookers during 20X1. What is the margin of safety (in units, to nearest whole unit)?

A) 1290
B) 1956
C) 1793
D) 1876

Question 17

Cost-volume-profit analysis is a tool for working out the sales revenue on future projects

Question 18

JJ Ltd is a landscape gardener and sub contracts labour as their contracts increase or decline. (a) (c) (b) (d) Which of the above graphs reflect JJ Ltd s labour cost?

A) Graph (a)
B) Graph (b)
C) Graph (c)
D) Graph (d)

Question 19

Rob and John Ltd manufactures a standard model of vacuum cleaner. The selling price of each cleaner is £155. Variable costs of manufacture are £55.00. During its 20X1 financial year the company expects to incur fixed production costs of £80000 and fixed selling and administration overheads of £36000. How many vacuum cleaners will the company have to sell in order to break-even (to the nearest whole unit)?

A) 1670
B) 1409
C) 1130
D) 1160

Question 20

It is assumed that in linear cost functions their is only one independent variable.