Management Accounting

The contribution margin is the amount of revenue remaining after deducting fixed costs

Sales mix is the percentage that each product represents of total sales

If the unit contribution margin is $300 and fixed costs are $240,000 then the break-even point in units would be 800 units.

In a CVP income statement, contribution margin is reported in the body of the statement.

Margin of safety is the difference between actual sales and contribution margin.

Which of the following is a false statement regarding assumptions of CVP analysis?

Mixed costs may be separated into fixed costs and variable costs by using

If the unit selling price is $500, the unit variable cost is $300, and the total monthly fixed costs are $300,000, then the contribution margin ratio is

If activity level increases 25% and a specific cost increases from $40,000 to $50,000, this cost would be classified as a

If total fixed costs are $900,000 and variable costs as a percentage of unit selling price are 40%, then the break-even point in dollars is

The CVP income statement classifies costs as variable or fixed and computes a contribution margin.

The margin of safety indicates how much sales must increase before a company will be operating at a profit.

Sales mix is the relative percentage in which each product is sold when a company sells more than one product.

When multiple products exist, the break-even point in dollars is computed by dividing fixed costs by the weighted-average contribution margin.

 When a company has limited resources, management must decide which product to make and sell in order to maximize contribution margin ratio.

Contribution margin per unit of limited resource is obtained by dividing the contribution margin per unit of each product by the number of units of the limited resource required for each product.

Operating leverage refers to the extent to which a company’s net income reacts to a given change in production.

Companies that have higher fixed costs relative to variable costs have higher operating leverage

Under variable costing, all variable costs are considered product costs.

Fixed manufacturing costs are a product cost under absorption costing but are a period cost under variable costing. 

For a company selling multiple products, the break-even point in dollars is computed by dividing fixed costs by the

In order to maximize net income a company should produce and sell the product with the highest.

Operating leverage refers to the extent to which a company’s net income reacts to a given change in

 Under variable costing, all of the following are considered product costs except

All of the following are potential advantages of variable costing except that

Determining and evaluating possible courses of action is a step in management’s decision-making process.

In incremental analysis fixed costs may not change under alternative courses of action, while variable costs may change

The relevant data to consider in accepting an order at a special price are the additional manufacturing costs incurred and expected revenues.

The basic decision rule to sell or process further is: process further as long as the incremental revenue from such processing exceeds the incremental processing costs.

Book value is a sunk cost and is therefore relevant in incremental analysis of retain or replace equipment.

Fixed manufacturing costs will never be relevant in a make or buy decision.

Opportunity costs are costs that have already been incurred and will not be avoided by any future decision.

In deciding on the future status of an unprofitable segment, management should consider the effect of elimination on the remaining product lines.

Joint product costs are relevant for any sell-or-process further decisions.

Any trade-in allowance or cash disposal value of the old asset is relevant in a retain or replace equipment decision.

Which of the following is not a step in management’s decision-making process?

If revenues are $315,000 under alternative A and $324,000 under alternative B, and costs are $285,000 for A and $306,000 for B, then using the basic approach in incremental analysis, incremental revenues, costs, and net income, in comparing B to A are respectively

 The cost to manufacture an unfinished unit is $120 ($90 variable, $30 fixed). The selling price per unit is $150. The company has unused productive capacity and has determined that units could be finished and sold for $195 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit?

The potential benefit that may be obtained from following an alternative course of action is called

In a make or buy decision, the relevant costs include each of the following except the