ACCT 472.21 Ch 19

Flashcard maker : Lily Taylor
CVP analysis does not consider
fixed cost per unit.
An example of a mixed cost is
utility costs.
If graphed, fixed costs that behave in a curvilinear fashion resemble a(n)
stair-step pattern.
Why is identification of a relevant range important?
Cost behavior outside of the relevant range is not linear, which distorts CVP analysis.
Cost-volume-profit analysis includes all of the following assumptions except
the behavior of costs is curvilinear throughout the relevant range.
Which is the true statement?
The CVP income statement shows contribution margin instead of gross profit.
Which of the following is not a cost classification?
Which of the following is not a mixed cost?
In CVP analysis, the term “cost”
includes manufacturing costs plus selling and administrative expenses.
Contribution margin is
available to cover fixed costs and contribute to income for the company.
Firms operating at 100% capacity
are the exception rather than the rule.
Which of the following is not true about the graph of a mixed cost?
The variable cost portion of the graph is rectangular in shape.
A fixed cost is a cost which
remains constant in total with changes in the level of activity.
A variable cost is a cost that
varies in total in proportion to changes in the level of activity.
Keene, Inc. produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During March, 1,000 drives were sold. Fixed costs for March were $4.90 per unit for a total of $4,900 for the month. If variable costs decrease by 10%, what happens to the break-even level of units per month for Keene?
It decreases about 14 units.
Which of the following is not a fixed cost?
Direct materials
The equation which reflects a CVP income statement is
Sales – Variable costs – Fixed costs = Net income.
Changes in activity have a(n) _________ effect on fixed costs per unit.
A CVP graph does not include a
variable cost line.
The contribution margin ratio increases when
variable costs as a percentage of sales decrease.
The break-even point is where
contribution margin equals total fixed costs.
For an activity base to be useful in cost behavior analysis,
there should be a correlation between changes in the level of activity and changes in costs.
Cost behavior analysis applies to
retailers and wholesalers and manufacturers.
“all entities!!!”
The amount by which actual or expected sales exceeds break-even sales is referred to as
target net income.
The relevant range of activity refers to the
levels of activity over which the company expects to operate.
Which of the following is not an underlying assumption of CVP analysis
Beginning inventory is larger than ending inventory.
Which of the following would not be an acceptable way to express contribution margin
Sales minus unit costs
To which function of management is CVP analysis most applicable
CVP analysis is not important in
calculating depreciation expense

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