18) Which of the following statements is correct? A) At the break-even point, to
ID: 2390306 • Letter: 1
Question
18) Which of the following statements is correct?A) At the break-even point, total revenue equals total fixed costs.
B) The contribution margin is fixed costs minus total variable costs.
C) If the contribution margin ratio is 40%, it means that every $1.00 of sales will contribute $0.40 to covering fixed costs and generating a profit.
D) Contribution margin ratio is generally the same as gross margin ratio.
19) Which of the following statements is incorrect?
A) Total production cost is generally a mixed cost.
B) In order to use C-V-P analysis, costs must be broken out into fixed and variable components.
C) The account analysis method is subjective in that different managers viewing the same set of facts may reach different conclusions regarding which costs are fixed and which costs are variable.
D) The account analysis method of estimating fixed and variable costs uses a computer program to fit a line to historical data.
22) When activity based costing is implemented, the initial outcome is normally that:
A) The cost of all products will be higher.
B) The cost of all products will be lower.
C) The cost of low volume products will be higher and the cost of high volume products will be lower.
D) The cost of low volume products will be lower and the cost of high volume products will be higher.
24) A product line should be dropped from the corporation
Explanation / Answer
18) Which of the following statements is correct?
A) At the break-even point, total revenue equals total fixed costs.
B) The contribution margin is fixed costs minus total variable costs.
C) If the contribution margin ratio is 40%, it means that every $1.00 of sales will contribute $0.40 to covering fixed costs and generating a profit.
D) Contribution margin ratio is generally the same as gross margin ratio.
19) Which of the following statements is incorrect?
A) Total production cost is generally a mixed cost.
B) In order to use C-V-P analysis, costs must be broken out into fixed and variable components.
C) The account analysis method is subjective in that different managers viewing the same set of facts may reach different conclusions regarding which costs are fixed and which costs are variable.
D) The account analysis method of estimating fixed and variable costs uses a computer program to fit a line to historical data.
22) When activity based costing is implemented, the initial outcome is normally that:
A) The cost of all products will be higher.
B) The cost of all products will be lower.
C) The cost of low volume products will be higher and the cost of high volume products will be lower.
D) The cost of low volume products will be lower and the cost of high volume products will be higher.
24) A product line should be dropped from the corporation’s offerings when:
A) Used versions begin to appear on EBay.
B) It is outselling the competition.
C) When annual sales growth drops to zero.
D) It has a negative contribution margin.
26) Tyler’s Consulting Company has purchased a new $15,000 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. The copier is estimated to provide 1 million copies over its life. Each division has estimated the number of copies which will be made over the life of the copier.
Purchasing 375,000
Accounting 200,000
Information Tech 425,000
Note: Cost allocations are computed to 4 significant digits. Resulting values are rounded to the whole dollar. If the purchasing department makes 72,013 copies this year what will be their allocated overhead?
solution=total cost=15000
purchasing department cost=150000*71013/100000=$1080
28) Kelmore Company wants to use ABC costing. For the cost of ordering parts, which of the following Kelmore should use as the cost driver?
A) Weights of parts ordered.
B) Direct labor cost.
C) Number of orders placed.
D) Depreciation expense.
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