For the multiple choice questions, more than one answer may be correct under limited business operating conditions. You are to select only one answer. The one that is most correct under normal business operating conditions.
1 ABC Inc. uses a cost structure that includes some specific cost categories that behave as fixed costs, some variable costs, and some mixed costs. As ABC's activity ( units produced and sold) level increases the average cost (on a per unit basis) for each of the three cost types above will
a) decrease, increase, increase
b) decrease, decrease, increase
c) not change, not change, not change
d) not change, increase, increase
e) increase, decrease, no change
f) decrease, no change, decrease
2 . The budgeting process usually begins with forecasting the value of future
a) Cash Flow
b) Costs as a percentage of Sales
c) Sales
d) Labor costs
3 . During the preparation of a complete cash budget, the following line item would normally not appear
a) Sales
b) Dividend Payments
c) Loan Repayments
d) Depreciation
4. In terms of cost behavior, total variable cost
a) Remains the same dollar amount from period to period
b) Increases proportionately to changes in the cost driver
c) May change from period to period regardless of an increase or decrease in activity
d) Decreases slightly from period to period
5 .From a total cost perspective, as unit sales decrease within a normal operating range
a) Fixed costs per unit will increase
b) Fixed costs per unit will decrease
c) Fixed costs per unit will stay the same
6 .On a unit cost basis, as unit sales decrease within a normal operating range
a) Variable costs per unit will increase
b) Variable costs per unit will decrease
c) Variable costs per unit will stay the same
7 . As total unit sales decrease within a normal operating range
a) Total variable costs will increase
b) Total variable costs will decrease
c) Total variable costs will stay the same
8. As total sales dollars increase within a normal operating range
a) The contribution margin will increase
b) The contribution margin will decrease
c) The contribution margin will stay the same
9. Which formula best represents the calculation of the contribution margin ratio
a) Sales minus fixed costs
b) Sales minus variable costs
c) Sales minus total costs
d) Salves minus variable costs divided by sales
10. On the traditional / normal breakeven graph, the line with the steepest slope is the
a) Fixed cost line
b) Total cost line
c) Revenue line
11. Which of the following time value of money factors is the largest value. Assume that the investment horizon is 10 years and the discount rate is 10%
a) future value of a single sum
b) present value of a single sum
c) future value of an annuity
d) present value of an annuity
12. MSM Inc. sells garden statues. Each statue sells for $95. MSM Inc. buys each statue for $40 and pays a 20% commission to salespeople for all sales made by the company. All other costs ($3,000 each month) are fixed. If MSM Inc. reduces monthly fixed cost by $800 but increases the commission rate by 8%
a) the monthly break-even point in unit sales will increase
b) the monthly break-even point in unit sales will decrease
c) the monthly break-even point in unit sales will not change
d) need more information to be able to calculate the change
e) monthly sales in units -beginning inventory + ending inventory
13. A contribution type income statement presents costs grouped by
a. dollar value
b. function (admin, selling, cogs, etc)
c. behavior
d. alphabetical order
14 .The capital budgeting model focuses on a project's expected.
a. annual cash flows over the life of the project.
b. annual net income over the life of the project.
c. annual revenue created over the life of the project.
d. annual costs saved over the life of the project.
15. ABC Company currently has monthly fixed costs of $20,000, variable cost per unit of $10 and a selling price of $15 per unit. The firm is considering decreasing monthly fixed cost by $3,000 and increasing variable cost per unit by $3. The impact of these changes will be to
a. increase the unit breakeven point.
b. decrease the unit breakeven point.
c. have no impact on the unit breakeven point.