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Exam 12: Managerial Accounting and Cost-Volume-Profit Relationships

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Question 31

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Managerial accounting, as compared to financial accounting:

A) must conform to GAAP.
B) places a great deal of emphasis on historical transactions.
C) uses frequent and prompt control reports.
D) focuses on information prepared for the investors and creditors.

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Question 32

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Knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes:

A) net income will change proportionately.
B) the effect on net income will depend on the behavior pattern of various costs.
C) fixed costs will rise proportionately.
D) variable costs will not change.

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Question 33

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Presented below is the income statement for Breckenridge Farms for the month of October: Based on an analysis of cost behavior patterns, it has been determined that the company's contribution margin ratio is 30%.(a.) Rearrange the income statement to the contribution margin format.(b.) If sales increase by 20 percent, what will be the firm's operating income? (c.) Calculate the amount of revenue required for Breckenridge Farms to break even.

The cost formula for monthly customer order processing cost has been established as $100 + $0.15 per order. It is expected that 5,600 orders will be processed in May and 6,400 in June. Total order processing costs for May and June combined will be estimated to be:

Cost behavior refers to:

An example of a cost likely to have a fixed behavior pattern is:

The break-even point in terms of total revenues per month is:

ABC Company's sales are $100,000, fixed costs are $50,000, and variable costs are $30,000. ABC Company's contribution margin ratio is:

XYZ Company has a variable cost ratio of 40%, fixed expenses of $200,000, and desires to earn operating income of $100,000. Total sales revenue required to achieve XYZ Company's desired operating income is:

Simplifying assumptions made when using cost behavior pattern data include:

An income statement organized by cost behavior does not include:

Performance analysis in the planning and control cycle relates to the act of:

During the months of January through June, the following total utility costs were paid at various production volumes: a. Use the high-low method to calculate the cost formula utility costs.b. If the production volume were expected to be 50,000 units for the month of July, what amount of total costs would be expected?

ABU Co. has several products, each with a different contribution margin ratio. If the same number of units were sold in July as in June, but the sales mix changed:

If sales volume were to decrease 10%, from 4,000 units per month to 3,600 units per month, operating income would:

As the total volume of activity changes:

Preppy Co. makes and sells a single product. The current selling price is $30 per unit. Variable costs are $21 per unit, and fixed expenses total $90,000 per month. Sales volume for July totaled 12,000 units.a. Calculate the operating income for July.b. Calculate the break-even point in units sold and total revenues.c. Management is considering the use of automated production equipment. If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month.(1.) Calculate operating income at a volume of 12,000 units per month with the new cost structure.(2.) Calculate the break-even point in units with the new cost structure.

Managerial accounting can best be described as:

Using the high-low method, the monthly fixed component of maintenance cost is:

The formula for expressing the total of a fixed, variable, or mixed cost at any level of activity is: