Book Title; Author

Chapter 15 - Multiple choice quiz



1.
For an activity level to be useful in cost behaviour analysis,
A.
the activity should always be stated in dollars.
B.
there should be a correlation between changes in the level of activity and changes in costs.
C.
the activity should always be stated in terms of units.
D.
the activity level should be constant over a period of time.


2.
An increase in the level of activity will have the following effects on unit variable and fixed costs:

Unit Variable Cost/Unit Fixed Cost
A.
Increase/Decrease
B.
Remains constant/Remains constant
C.
Decrease/Remains constant
D.
Remains constant/Decrease


3.
The increased use of automation and less use of the work force in companies has caused a trend towards an increase in
A.
both variable and fixed costs.
B.
fixed costs and a decrease in variable costs.
C.
variable costs and a decrease in fixed costs.
D.
variable costs and no change in fixed costs.


4.
Mixed costs contain both a
A.
variable and volume cost element.
B.
linear and non-linear cost element.
C.
variable and fixed cost element.
D.
production and period cost element


5.
In CVP analysis, the term "cost"
A.
includes only manufacturing costs.
B.
means cost of goods sold.
C.
includes manufacturing costs plus selling and administrative expenses.
D.
excludes all fixed manufacturing costs.


6.
Which one of the following is not an assumption of CVP analysis?
A.
All units produced are sold.
B.
All costs are variable costs.
C.
Sales mix remains constant.
D.
The behaviour of costs and revenues are linear within the relevant range.


7.
If more units are produced than are sold during a period, variable costing profit
A.
will be greater than absorption costing profit.
B.
will be less than absorption costing profit.
C.
will be the same as absorption costing profit.
D.
may be either greater or less than absorption costing profit.


8.
Contribution margin
A.
is always the same as gross profit margin.
B.
excludes variable selling costs from its calculation.
C.
is calculated by subtracting total manufacturing costs per unit from sales revenue per unit.
D.
equals sales revenue minus variable costs.


9.
If Neptune Ltd had a contribution margin of $200,000 and a contribution margin ratio of 40%, total variable costs must have been
A.
$300,000.
B.
$120,000.
C.
$500,000.
D.
$80,000.


10.
Galactic Ltd's sales are $250,000 and variable costs are $150,000. What is the contribution margin ratio?
A.
67%
B.
40%
C.
60%
D.
cannot be determined because amounts are not expressed per unit.


11.
Stellar Ltd has total fixed costs of $120,000 and a contribution margin ratio of 20%. The total sales necessary to break even are
A.
$480,000.
B.
$600,000.
C.
$150,000.
D.
$144,000.


12.
Quasar Ltd's fixed costs are $900,000 and the contribution margin per unit is $150. What is the break-even point?
A.
$2,250,000.
B.
$6,000,000.
C.
2,250 units.
D.
6,000 units.


13.
Atomix Ltd has the following data:
              Variable costs are 70% of the unit selling price.
              The contribution margin ratio is 30%.
              The contribution margin per unit is $500.
              The fixed costs are $400,000.
Which of the following does not express the break-even point?
A.
$400,000 + .70X = X
B.
$400,000 + .30X = X
C.
$400,000 ÷ $500 = X
D.
$400,000 ÷ .30 = X


14.
The amount by which actual or expected sales exceeds break-even sales is referred to as
A.
20%
B.
25%.
C.
80%.
D.
125%.


15.
Neutron Ltd desires to sell a sufficient quantity of products to earn a profit of $80,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $160,000, how many units must be sold to earn net profit of $80,000?
A.
45,000 units
B.
30,000 units
C.
24,000 units
D.
18,000 units


16.
What level of sales are required to earn a target net profit of $80,000 if total fixed costs are $100,000 and the contribution margin ratio is 40%?
A.
$250,000.
B.
$405,000.
C.
$450,000.
D.
$200,000.


17.
Which is the true statement?
A.
In a CVP income statement, costs and expenses are classified only by function.
B.
The CVP income statement is prepared for both internal and external use.
C.
The CVP income statement shows contribution margin instead of gross profit.
D.
In a traditional income statement, costs and expenses are classified as either variable or fixed.


18.
The following information is available for Galaxy Ltd:
 
 
 
Sales
$600,000
 
Total fixed expenses
$150,000
Cost of goods sold
390,000
 
Total variable expenses
360,000

A CVP income statement would report
 
A.
gross profit of $210,000.
B.
contribution margin of $450,000.
C.
gross profit of $240,000.
D.
contribution margin of $240,000.



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