Deck 9: Using Cost Information to Make Special Decisions

Question 1

Total Revenues can be calculated using the formula: Total Revenues = Price x ___________.

A) Quality
B) Quantified
C) Quantity
D) Quagmire

Answer 1

Quantity

Question 2

Major error(s) that must be avoided when using fixed cost information to make decisions are:

A) Using fixed costs per unit derived at all levels to forecast costs
B) Assuming that cost per unit does not change when volume changes
C) Both a & b
D) None of the above

Answer 2

Assuming that cost per unit does not change when volume changes

Question 3

Relevant range is the range of activity over which total fixed costs or per unit variable cost __________.

A) Vary
B) Do not vary
C) Always vary
D) Can vary

Answer 3

Do not vary

Question 4

Break-even point is where total revenues equal total _____________.

A) Expected cash flows
B) Total costs
C) Industry averages
D) CEO's salary

Question 5

Total contribution margin is total revenues - ________________.

A) Total fixed costs
B) Total units
C) Fixed variable costs
D) Total variable costs

Question 6

Common costs benefit__________________.

A) Everyone in an organization
B) No one
C) A select few
D) None of the above

Question 7

Product margin = total contribution margin - __________________.

A) Voided fixed costs
B) Avoidable fixed costs
C) Fixed costs
D) Total variable costs

Question 8

Per unit contribution margin= per unit revenues - ______________.

A) Variable cost
B) Total fixed cost
C) Per unit variable cost
D) Per unit fixed cost

Question 9

Controlling costs or decreasing profit margins to meet or beat a predetermined price or reimbursement rate is ___________________.

A) Transfer cost pricing
B) Variable costing
C) Targeted pricing
D) Target costing

Question 10

Additional costs incurred solely as a result of an action or activity or a particular set of actions or activities are ___________________.

A) Incurred costs
B) Incremental costs
C) Infallible costs
D) Incredible costs

Question 11

Incremental costs are always unforeseen.

Question 12

The basic break-even equation is: price x volume= variable cost per unit + (fixed cost x volume).

Question 13

Product margin is calculated by this equation: total contribution margin - avoidable fixed costs.

Question 14

A break-even chart shows the break-even point.

Question 15

Variable costs vary per unit over the relevant range.

Question 16

After comparing the product margins between the make-or-buy alternatives the alternative with the higher product margin should be chosen.

Question 17

If an existing service has a negative product margin, it should not be dropped.

Question 18

In healthcare target costing usually involves the provider as the price setter and the government as the price taker.

Question 19

In a make-or-buy decision buying is always the better alternative.