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Exam 2: Cost Behavior, Operating Leverage, and Profitability Analysis

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Question 41

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Potential problems associated with cost averaging can be reduced by averaging the cost over a shorter span of time.

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B) False

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Question 42

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Contribution margin can only be determined if costs are separated into product and period costs.

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Question 43

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Carson Corporation's sales increase from $500,000 to $600,000 in the current year.What is the percentage change in sales?

If the company's volume doubles,the total cost per unit will:

Taste of the Town,Inc.operates a gourmet sandwich shop.The company orders bread,cold cuts,and produce several times a week.If the cost of these items remains constant per customer served,the cost is said to be:

The following income statement was produced when volume of sales was at 400 units. $\begin{array} { | l | l r | } \hline \text { Sales Revenue } & \$ & 2,000 \\\text { Variable Cost } & & 1,200 \\ \text { Contribution Margin } & \$ & 800 \\\text { Fixed Cost } & & 300 \\\text { Net Income } & \$ & 500 \\\hline\end{array}$ If volume reaches 500 units,net income will be:

The manager of Kenton Company stated that 45% of its total costs were fixed.The manager was describing the company's:

Why would a company need to estimate the fixed and variable components of a mixed cost?

The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000.If sales increase by 5%,what is net income expected to be?

Southern Food Service operates six restaurants in the Atlanta area.The company pays rent of $20,000 per year for each shop.The managers of each shop are paid a salary of $4,200 per month and all other employees are paid on an hourly basis.Relative to the number of hours worked,total compensation cost for a particular shop is which kind of cost?

How does total fixed cost behave when volume increases?

Select the incorrect statement regarding the contribution margin income statement.

What is meant by the phrase,"cost s

Descriptions of cost behavior as fixed or variable pertain to a particular range of activity.

If a company had a pure fixed cost s

If managers of a company do not understand the behavior of its costs,they are likely to make poor decisions about the company's operations.

Mug Shots operates a chain of coffee shops.The company pays rent of $15,000 per year for each shop.Supplies (napkins,bags and condiments) are purchased as needed.The managers of each shop are paid a salary of $2,500 per month and all other employees are paid on an hourly basis.The cost of rent relative to the number of customers in a particular shop and relative to the number of customers in the entire chain of shops is which kind of cost,respectively?

If a company had a pure variable cost s

The activity director for City Recreation is planning an activity.She is considering alternative ways to set up the activity's cost s

An advantage of using the scattergraph method over the high-low method is that all points of data are used in determining the cost line.