Question 1

If activity level increases,what happens to the total fixed cost?
A)It decreases.
B)It increases.
C)It remains the same.
D)It depends on how much the activity level increases.

Accepted Answer

The answer of If activity level increases,what happens to the...

Question 2

Operating income = Sales revenue - Variable cost per

Accepted Answer

This formula for calculating operating income is correct.

Question 3

If activity level decreases,what happens to the
A)It decreases.
B)It increases.
C)It remains the same.
D)It depends on how much the activity level increases.

Accepted Answer

When activity level decreases, it means there is a reduction in physical or mental exertion, which leads to a decrease in activity level. This could be due to various reasons like illness, injury, sedentary lifestyle, etc. Hence, the best choice is A, which indicates a decrease in activity level.

Question 4

When production and sales are equal,a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

Accepted Answer

The contribution format income statement arrives at the same operating income as in the traditional functional income statement when production equals sales,

Question 5

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Accepted Answer

Contribution margin is the revenue that remains after deducting variable costs from sales revenue. This amount is then used to cover fixed costs and provide a profit.

Question 6

Contribution margin = Sales revenue - Total variable costs.

Accepted Answer

This formula defines the contribution margin, which represents the amount that sales cover fixed costs and contribute to profits.

Question 7

Unlike the contribution margin in dollars,the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

Accepted Answer

The contribution margin ratio can be used to determine the increase in profits from a given dollar increase in sales revenue, because the ratio represents the portion of every sales dollar that is available to cover fixed costs and go towards profit.,

Question 8

If activity level increases,what happens to the
A)It remains the same.
B)It decreases.
C)It increases.
D)It depends on how much the activity level increases.

Accepted Answer

The answer of If activity level increases,what happens to the
A)It...

Question 9

GAAP-based income statements categorize expenses based on
A.business function.
B.cost behavior.
C.dollar amount.
D.contribution margin.

Accepted Answer

GAAP-based income statements categorize expenses based on business function, such as cost of goods sold, selling expenses, and administrative expenses.

Question 10

The contribution margin is the difference between sales and fixed costs.

Accepted Answer

The contribution margin is the difference between sales and variable costs,

Question 11

If activity level increases,what happens to the
A)It decreases.
B)It increases.
C)It remains the same.
D)It depends on how much the activity level increases.

Accepted Answer

The answer of If activity level increases,what happens to the
A)It...

Question 12

A contribution format income statement just rearranges the individual costs components and produces the same operating income as the traditional functional income statement.

Accepted Answer

The answer of A contribution format income statement just rearranges...

Question 13

If activity level decreases,what happens to the total fixed cost?
A)It remains the same.
B)It decreases.
C)It increases.
D)It depends on how much the activity level increases.

Accepted Answer

The answer of If activity level decreases,what happens to the...

Question 14

If activity level decreases,what happens to the total variable cost?
A)It decreases.
B)It increases.
C)It remains the same.
D)It depends on how much the activity level increases.

Accepted Answer

The answer of If activity level decreases,what happens to the...

Question 15

If activity level increases,what happens to the total variable cost?
A)It remains the same.
B)It decreases.
C)It increases.
D)It depends on how much the activity level increases.

Accepted Answer

The answer of If activity level increases,what happens to the...

Question 16

The relevant range is the normal level of operating activity.

Accepted Answer

The relevant range is defined as the normal level of operating activity within which a company expects to operate. It is the range of activity over which a company's assumptions about cost behavior are valid. Therefore, the statement is true.

Question 17

A basic tool for making business decisions is the contribution margin.

Accepted Answer

The contribution margin is a basic tool for making business decisions, as it helps determine the profitability of each unit sold and the level of sales needed to cover fixed costs and achieve a desired level of profit.

Question 18

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

Accepted Answer

The contribution margin income statement separates variable costs from fixed costs, enabling managers to see how changes in sales volume affect the contribution margin and ultimately, operating income.

Question 19

The contribution format income statement presents cost by behavior.

Accepted Answer

The contribution format income statement separates costs into variable and fixed categories, presenting them by behavior rather than by their nature (such as direct materials or rent).

Question 20

GAAP-based income statements categorize expenses based on
A)product,contribution,selling or administrative.
B)product,selling or administrative.
C)contribution,product,administrative.
D)variable costs and fixed costs.

Accepted Answer

GAAP-based income statements categorize expenses into three main categories: product costs (direct costs related to producing/selling goods), selling expenses (costs related to marketing/selling goods), and administrative expenses (costs related to running the business). Therefore, choice B is the correct answer because it includes all three main categories of expenses. Choice A is incorrect because "contribution" is not a recognized category for expenses in GAAP. Choice C is incorrect because "contribution" is not a recognized category for expenses, and it lists "product" before "administrative," which is not the typical order. Choice D is incorrect because it only distinguishes expenses based on cost behavior, not their purpose or function in the business.

Quiz 2: Cost Behavior and Cost Estimation

If activity level increases,what happens to the total fixed cost?

Operating income = Sales revenue - Variable cost per

If activity level decreases,what happens to the

When production and sales are equal,a drawback of the contribution format income statement is that is does not produce the same operating income as the traditional functional income statement format.

Contribution margin is the amount of revenue that remains to cover fixed costs and provide a profit.

Contribution margin = Sales revenue - Total variable costs.

Unlike the contribution margin in dollars,the contribution margin ratio cannot be used to determine the increase in profits from a given dollar increase in sales revenue.

If activity level increases,what happens to the

GAAP-based income statements categorize expenses based on A.business function. B.cost behavior. C.dollar amount. D.contribution margin.

The contribution margin is the difference between sales and fixed costs.

If activity level increases,what happens to the

A contribution format income statement just rearranges the individual costs components and produces the same operating income as the traditional functional income statement.

If activity level decreases,what happens to the total fixed cost?

If activity level decreases,what happens to the total variable cost?

If activity level increases,what happens to the total variable cost?

The relevant range is the normal level of operating activity.

A basic tool for making business decisions is the contribution margin.

The contribution margin income statement allows managers to easily assess the impact of sales volume on operating income.

The contribution format income statement presents cost by behavior.

GAAP-based income statements categorize expenses based on