Q1 .A 10% change in a firm's revenues is likely to result in a change of more than 10% in the firm's operating income because: 

1.        not all of the firm's costs will change in proportion to the revenue change

2.        the firm has financial leverage

3.        the contribution margin ratio will change in proportion to the revenue change

4.        only fixed expenses will change in proportion to the revenue change

Q2.Cost behavior refers to:

1.        costs that are both good and bad

2.        costs that increase at a quicker rate than others

3.        costs that decrease at a quicker rate than others

4.        costs that are variable or fixed

5.        none of the above

Q3.When the high-low method of estimating a cost behavior pattern is used:

1.        cost and volume data must be reviewed for outliers

2.        the direct result of the high-low calculations is the fixed expense amount

3.        the highest and lowest sales price and volume amounts are used in the calculation

4.        the resulting cost formula will explain total cost accurately for every value between the high and low volumes

Q4.The shift in the amount of manufacturing overhead costs applied to the mix of products produced that occurs when using a single cost driver rate as compared to using activity-based costing rates is known as:

1.        underapplied overhead

2.        overapplied overhead

3.        cost absorption

4.        cost distortion

Q5.An excess of cost of goods manufactured over cost of goods sold for the period represents:

1.        an increase in gross profit

2.        a decrease in work in process inventory

3.        overapplied manufacturing overhead

4.        an increase in finished goods inventory

Q6.Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?

1.        units produced equals units sold

2.        units produced is greater than units sold

3.        units produced is less than units sold

4.        income determined with absorption costing will always equal income determined with direct costing

Q7.For the partial value chain functions given below, which sequence is correct?

1.        design, production, marketing

2.        marketing, production, distribution

3.        research and development, production, distribution

4.        customer service, marketing, distribution

Q8.An example of a cost likely to have an indirect relationship with products being manufactured:

1.        production labor costs

2.        raw material costs

3.        electricity costs for packaging equipment

4.        none of the above

Q9.Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because:

1.        direct costs identified with the product or activity may not be accurately assigned

2.        fixed costs will change in total if the volume of activity changes

3.        all costs may not have been allocated to the product or activity

4.        arbitrarily allocated costs may not behave in the way assumed in the allocation method