ACCT 2302 test 2

Question 1

The CVP income statement classifies costs

a. as variable or fixed and computes contribution margin.
b. by function and computes a contribution margin.
c. as variable or fixed and computes gross margin.
d. by function and computes a gross margin.

Answer 1

a. as variable or fixed and computes contribution margin.

Question 2

T/F

If volume increases, all costs will increase.

Answer 2

F

Question 3

T/F

Changes in the level of activity will cause unit variable and unit fixed costs to change in
opposite directions.

Answer 3

F

Question 4

T/F

Costs will not change in total within the relevant range of activity.

Answer 4

F

Question 5

T/F

The break-even point is where total sales equal total fixed costs.

Answer 5

F

Question 6

T/F

ABC leads to enhanced control over overhead costs.

Answer 6

T

Question 7

T/F

ABC is generally more costly to implement than traditional costing

Answer 7

T

Question 8

The margin of safety tells a company how far sales can drop before it will be operating at
a loss.

Answer 8

T

Question 9

Two costs at Bradshaw Company appear below for specific months of operation.
Month Amount Units Produced
Delivery costs September $ 40,000 40,000
October 55,000 60,000
Utilities September $ 84,000 40,000
3

October 126,000 60,000
Which type of costs are these?
a. Delivery costs and utilities are both variable.
b. Delivery costs and utilities are both mixed.
c. Utilities are mixed and delivery costs are variable.
d. Delivery costs are mixed and utilities are variable.

Answer 9

D

Question 10

The degree of operating leverage:

a. Can be computed by dividing total contribution margin by net income.
b. Provides a measure of the company’s earnings volatility.
c. Affects a company’s break-even point.
d. All of the above.

Answer 10

d. All of the above.