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1. A 10% change in the firm's revenues is probable to result in the change of more than 10% in the firm's operating income as:

• not all of the firm's costs will modify in proportion to the revenue change
• the firm has financial leverage
• the contribution margin ratio will modify in proportion to revenue change
• only fixed expenses will modify in proportion to the revenue change

2. Cost behaviour refers to:

• costs which are both good and bad
• costs which increase at a quicker rate than others
• costs which decrease at a quicker rate than others
• costs which are variable or fixed
• none of the above

3. When high-low method of computing a cost behaviour pattern is used:

• cost and volume data should be reviewed for outliers
• the direct result of high-low computation is the fixed expense amount
• the highest and lowest sales price and volume amounts are used in the computation
• the resulting cost formula will describe total cost correctly for every value between the high and low volumes

4. The shift in an amount of manufacturing overhead costs applied to mix of products produced which happens when using the single cost driver rate as compared to using activity-based costing rates is called as:

• underapplied overhead
• overapplied overhead
• cost absorption
• cost distortion

5. The excess of cost of goods manufactured over cost of goods sold for period represents:

• an increase in gross profit
• a decrease in work in process inventory
• overapplied manufacturing overhead
• an increase in finished goods inventory

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M99366

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