Smartbook Chapter 2

Question 1

A cost that does not change regardless of volume is a blank​ cost.

Answer 1

fixed

Question 2

What happens when activity level increases? (Select all that apply.)

Answer 2

variable cost per unit remains constant.
total variable cost increases.

Question 3

A cost that has both a fixed and variable component is called a(n) blank cost.

Answer 3

Mixed

Question 4

The range of activity over which the definition of fixed and variable costs are valid is called the range

Answer 4

relevant range

Question 5

A cost is defined as fixed or variable based on the blank base used

Answer 5

activity

Question 6

If a change in volume does not affect the total cost, the cost is defined as a(n) blank cost

Answer 6

fixed

Question 7

Assuming a firm has no operating leverage, a small change in revenue will lead to aThe ability of fixed costs to magnify changes in sales to create disproportionate changes in profitability is called

Answer 7

Operating Leverage

Question 8

What happens when activity level decreases? (Select all that apply.)

Answer 8

total variable cost decreases
variable cost per unit remains constant

Question 9

Mixed costs have blank components.

Answer 9

both variable and fixed

Question 10

Assume a company sold 100 units in Year 1 and 300 units in Year 2. What is the percentage change in units sold from Year 1 to Year 2?

Answer 10

200%

(Alternative measure-Base measure)/Base measure= Percent change (300-100)/100=2 Converting 2 to a percentage becomes 200%.

Question 11

The range of activity over which the definition of fixed and variable costs are valid is called the blank​ range.

Answer 11

relevant

Question 12

Risk ______.

Answer 12

is the possibility that sacrifices may exceed benefits

Question 13

The activity base is used to determine blank​.

Answer 13

false

Question 14

What happens If the activity level changes? (Select all that apply.)

Answer 14

total variable cost changes
variable cost per unit remains constant

Question 15

Assume a company estimates they will sell 50 units. What is the percentage change in units if actual sales are 80 units?

Answer 15

60%

Reason: (Alternative measure - Base measure) ÷ Base measure = Percent change: (80 - 50) ÷ 50 = 60%.

Question 16

Earnings fluctuations are more likely if ______ costs are high.

Answer 16

fixed

Question 17

The possibility that sacrifices may exceed benefits is called blank​.

Answer 17

risk

Question 18

The amount available after all variable expenses are deducted is the

Answer 18

contribution margin

Question 19

A cost is defined as fixed or variable based on the blank base used.

Answer 19

activity

Question 20

To reduce risk, a company should reduce operating leverage by utilizing a(n) blank cost structure.

Answer 20

Variable

Question 21

Contribution margin is calculated as revenue minus blank costs

Answer 21

variable

Question 22

Contribution margin is calculated as revenue minus blank costs

Answer 22

variable

Question 23

True or false: If the activity level increases, variable cost per unit remains constant.

Answer 23

True

Question 24

Choosing a cost structure that relies heavily on fixed costs will blank​.

Answer 24

cause earnings to fluctuate more than a structure that relies heavily on variable costs

Question 25

The amount available to cover fixed expenses and thereafter provide company profits is _blank​_.

Answer 25

contribution margin

Question 26

The activity base is used to determine _blank​_.

Answer 26

whether a cost is defined as fixed or variable

Question 27

An income statement prepared using the contribution margin approach classifies costs as _blank​_.

Answer 27

variable and fixed

Question 28

Earnings fluctuations are more likely if ______ costs are high.

Answer 28

fixed

Question 29

The amount available to cover fixed expenses and thereafter provide company profits is the *blank* *blank*

Answer 29

contribution margin

Question 30

Changing the activity base:

Answer 30

can change a fixed cost to a variable cost. can change a variable cost to a fixed cost.

Question 31

Choosing a cost structure that relies heavily on fixed costs will _blank​_.

Answer 31

cause earnings to fluctuate more than a structure that relies heavily on variable costs

Question 32

A cost is defined as fixed or variable based on the *blank* base used.

Answer 32

activity

Question 33

Earnings fluctuations are more likely if ______ costs are high.

Answer 33

fixed

Question 34

The activity base is used to determine _blank​_.

Answer 34

whether a cost is defined as fixed or variable