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| 1.
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Cost-volume-profit analysis is often referred to as break-even analysis. |
| | A) | True |
| | B) | False |
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| 2.
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A cost that remains unchanged in total within a relevant range of operations, yet decreases per unit of product as production accelerates, is known as a variable cost. |
| | A) | True |
| | B) | False |
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| 3.
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Variable costs change in proportion to changes in volume and, as a result, are shown on a graph as curvilinear line. |
| | A) | True |
| | B) | False |
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| 4.
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A mixed cost is a combination (or acts as if it contains a combination) of fixed and variable costs. |
| | A) | True |
| | B) | False |
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| 5.
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In cost-volume-profit analysis, some costs which do not have the characteristics of fixed or variable costs are treated as either fixed or variable for the purposes of the analysis. |
| | A) | True |
| | B) | False |
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| 6.
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When a factory hires a new supervisor every time it adds a shift to its production line, the salaries of the supervisors would be classified as a stair-step cost. |
| | A) | True |
| | B) | False |
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| 7.
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Variable costs and nonlinear costs are plotted on graphs as straight lines with a positive slope. |
| | A) | True |
| | B) | False |
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| 8.
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Curvilinear costs are linear in nature. |
| | A) | True |
| | B) | False |
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| 9.
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One of the simplest methods of analyzing fixed and variable costs is to use a scatter diagram, which requires a hand drawn 'best fit' line which begins on the vertical axis at the level of total fixed costs, then slopes upward along the horizontal axis to illustrate the slope of the variable cost line. |
| | A) | True |
| | B) | False |
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| 10.
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Using the high-low method to draw an estimated line of cost behaviour on a scatter diagram will result in a very precise line of estimated cost behaviour. |
| | A) | True |
| | B) | False |
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| 11.
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A method of estimating cost behaviour in which a line is drawn between the highest and lowest total costs plotted on a scatter diagram is known as the least-squares regression method. |
| | A) | True |
| | B) | False |
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| 12.
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The least-squares regression method is a statistical method for deriving an estimated line of cost behaviour that is more precise than the high-low method. |
| | A) | True |
| | B) | False |
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| 13.
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When a company's total contribution margin is $200,000 at the break-even point, its fixed costs are greater than $200,000. |
| | A) | True |
| | B) | False |
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| 14.
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If one unit of product produces $2.00 of contribution margin when sold, and fixed costs amount to $190, the pre-tax profit on the sale of 100 units will be $10 (assuming taxes are not included in the determination of contribution margin or fixed costs). |
| | A) | True |
| | B) | False |
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| 15.
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When the variable costs are 60% of sales dollars, the contribution ratio is 40%. |
| | A) | True |
| | B) | False |
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| 16.
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If the contribution margin is $45,000 at the break-even point, the fixed costs must be $45,000. |
| | A) | True |
| | B) | False |
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| 17.
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If the contribution ratio for a product is 65%, then the variable costs of the product are 35% of the sales price of the product. |
| | A) | True |
| | B) | False |
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| 18.
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When the selling price of a unit is $10 and the variable costs to make and sell the unit are $6, the contribution ratio is 40.0%. |
| | A) | True |
| | B) | False |
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| 19.
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One of the assumptions for cost-volume-profit analysis is that the selling price per unit remains unchanged for all units sold during the planning period. |
| | A) | True |
| | B) | False |
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| 20.
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While curvilinear costs are not illustrated as straight lines on a CVP graph, they tend to be nearly straight within the relevant range of operations. |
| | A) | True |
| | B) | False |
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| 21.
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If fixed costs are $10,000 and the variable cost per unit is $2, then expected sales of 20,000 units at $4 each should generate income (before taxes) of $30,000. |
| | A) | True |
| | B) | False |
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| 22.
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It is not possible to estimate the dollar of sales required to achieve a target income, after taxes, using CVP analysis. |
| | A) | True |
| | B) | False |
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| 23.
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If the current level of sales if $450,000 and the break-even point is $300,000, the margin of safety is 50%. |
| | A) | True |
| | B) | False |
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| 24.
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The profit of a company is equal to its margin of safety. |
| | A) | True |
| | B) | False |
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| 25.
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A company with current sales of $450,000 and a break-even point of $460,000 has a $10,000 margin of safety. |
| | A) | True |
| | B) | False |
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| 26.
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It is not possible to apply break-even analysis to firms that sell more than one product, when each product has a different variable cost. |
| | A) | True |
| | B) | False |
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| 27.
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If the degree of operating leverage is 1.5, then a 10% increase in sales (within the relevant range of operations) will result in a 150% increase in income. |
| | A) | True |
| | B) | False |
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| 28.
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Fixed cost per unit remains unchanged as volume increases. |
| | A) | True |
| | B) | False |
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| 29.
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Variable cost per unit decreases as volume increases. |
| | A) | True |
| | B) | False |
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| 30.
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Break-even point in units is calculated by dividing fixed cost by the contribution margin per unit. |
| | A) | True |
| | B) | False |
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| 31.
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CVP can be applied to a multi-product company by expressing the predicted sales volume in terms of composite units of product. |
| | A) | True |
| | B) | False |
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