Chapter 6 - Breakeven analysis part i

Question 1

If the activity level increases by 10%, total variable costs will

a. remain the same.
b. increase by more than 10%.
c. decrease by less than 10%.
d. increase by 10%.

Answer 1

d. increase by 10%

Question 2

2. Changes in activity have a(n) _________ effect on fixed costs per unit.
   a. positive
   b. negative
   c. inverse
   d. neutral

Answer 2

c. inverse

Question 3

3. Which of the following is not a fixed cost?
   a. Direct materials
   b. Depreciation
   c. Lease charge
   d. Property taxes

Answer 3

a. Direct materials

Question 4

4. Which of the following costs are variable? 
Cost 10,000 Units 30,000 Units 
 1. $100,000 $300,000 
 2. 40,000 240,000 
 3. 90,000 90,000 
 4. 50,000 150,000 

a. 1 and 2
b. 1 and 4
c. only 1
d. only 2

Answer 4

b. 1 and 4