Question 1

High operating gearing refers to:

Accepted Answer

A)   an activity with relatively high fixed costs compared with its variable costs.
B)   an activity with fixed costs equal to its variable costs.
C)   an activity with relatively high variable costs compared with its fixed costs.
D)   an activity with relatively low fixed costs compared with its variable costs.E) A) and D)
F) B) and C)

Question 2

L Ltd can subcontract out the manufacture of one of its components at $18 each. The business can produce the component internally for a total cost of $19, including the allocation of fixed costs at $5 per component. L Ltd has spare capacity. Should it make the component internally or contract it out?

Accepted Answer

A)   Subcontract, as it will be easier.
B)   Make the component, as the variable cost of $14 ($19 - $5)  for internal production is cheaper than the $18 cost of subcontracting.
C)   Subcontract, as the total cost of subcontracting at $18 is cheaper than the cost of $19 for internal production.
D)   None of the above.E) C) and D)
F) B) and D)

Question 3

Variable costs are represented graphically as:

Accepted Answer

A)   the intersection of total costs and total revenue lines.
B)   starting at zero and increasing in a straight line as activity increases.
C)   starting at a given point and increasing in a straight line as activity increases.
D)   a horizontal line, staying the same irrespective of the level of activity.E) A) and B)
F) A) and C)

Question 4

Use the information below to answer the following questions.
Sales Extraordinaire sells one particular photo frame. It estimates that it can sell as many frames as it produces. Sales price per unit $5.00
Variable cost per unit $2.00
Fixed costs per annum $9,000
-Refer to the table above. The break-even point in units is:

Accepted Answer

A)   3,000
B)   1,800
C)   5,500
D)   1,285E) A) and B)
F) C) and D)

Question 5

Management's concern about 'scarce resources' is primarily due to:

Accepted Answer

A)   social and environmental reasons.
B)   the desire to maximise total revenue.
C)   the desire to minimise total costs.
D)   the desire to make the most efficient use of scarce resources.E) B) and D)
F) A) and D)

Question 6

Variable costs per unit are also known as:

Accepted Answer

A)   break-even costs.
B)   activity costs.
C)   semi-variable costs.
D)   marginal costs.E) B) and C)
F) C) and D)

Question 7

When contribution margin per unit increases:

Accepted Answer

A)   break-even output increases.
B)   break-even output remains the same.
C)   break-even output decreases.
D)   fixed costs decrease.E) C) and D)
F) A) and C)

Question 8

Fixed costs are represented graphically as:

Accepted Answer

A)   starting at a given point and increasing in a straight line as activity increases.
B)   the intersection of the total costs and total revenue lines.
C)   starting at zero and increasing in a straight line as activity increases.
D)   a horizontal line, staying the same irrespective of the level of activity.E) None of the above
F) A) and B)

Question 9

Sales revenue per unit less variable costs per unit is known as:

Accepted Answer

A)   direct cost.
B)   avoidable cost.
C)   contribution per unit.
D)   all of the above.E) A) and B)
F) A) and C)

Question 10

Use the information below to answer the following questions.
Computer Expertise Ltd provides three services, the details for which are as follows:  The demand for all services is unlimited. The ability to provide each service is limited by the availability of qualified staff and therefore the labour time available.
-Refer to the table above. The demand for the Secretarial service is very strong, however Computer Expertise does not have sufficient labour hours available to meet the demand. An employment agency is able to supply qualified staff to provide the Secretarial service. What is the maximum price Computer Expertise should be prepared to pay per hour for agency staff?

Accepted Answer

A)   $12
B)   $18
C)   $30
D)   $9E) A) and C)
F) None of the above

Question 11

Which of these is a limitation in applying break-even analysis?

Accepted Answer

A)   multi-product businesses
B)   stepped fixed costs
C)   the possibility of non-linear relationships
D)   all of the aboveE) B) and C)
F) None of the above

Question 12

The vertical axes on a break-even chart and a profit-volume chart respectively, are:

Accepted Answer

A)   profit; sales revenue and costs.
B)   fixed costs; sales revenue.
C)   volume of output; volume of output.
D)   sales revenue and costs; profit.E) C) and D)
F) B) and C)

Question 13

The income statement for NY Blues is:  The break-even point in sales dollars is:

Accepted Answer

A)   $70,000
B)   $80,000
C)   $50,000
D)   cannot be calculatedE) A) and B)
F) A) and C)

Question 14

As output increases, variable costs per unit are:

Accepted Answer

A)   constant.
B)   semi-fixed.
C)   variable.
D)   proportional to total costs.E) C) and D)
F) B) and D)

Question 15

Which organisation is more likely to be highly operationally geared?

Accepted Answer

A)   internet service provider
B)   takeaway food outlet
C)   hairdresser
D)   vehicle manufacturerE) A) and D)
F) A) and C)

Question 16

Use the information below to answer the following questions.
Unique Tables manufactures coffee tables made of recycled timber. Market research has suggested that there will be strong demand for the tables. Due to this, management is debating whether to lease a new turning machine to meet increased production needs. To assist in their decision-making, the management accountant has supplied the following information: 
-Refer to the table above. The operating gearing for Unique Tables is:

Accepted Answer

A)   higher without the turning machine.
B)   insignificant.
C)   equal in both cases.
D)   higher with the turning machine.E) A) and C)
F) B) and D)

Question 17

If total costs are $80,000 at an output of 12,000 units and $95,000 at 15,000 units, fixed costs are:

Accepted Answer

A)   $20,000
B)   $15,000
C)   $5,000
D)   $10,000E) B) and C)
F) C) and D)

Question 18

Use the information below to answer the following questions.
Unique Tables manufactures coffee tables made of recycled timber. Market research has suggested that there will be strong demand for the tables. Due to this, management is debating whether to lease a new turning machine to meet increased production needs. To assist in their decision-making, the management accountant has supplied the following information: 
-Refer to the table above. At the current level of sales, which of the following results are achieved?

Accepted Answer

A)   without the turning machine profit of $30,000; with the turning machine profit of $22,500
B)   without the turning machine profit of $37,500; with the turning machine profit of $45,000
C)   without the turning machine profit of $45,000; with the turning machine profit of $52,500
D)   none of the aboveE) All of the above
F) None of the above

Question 19

For short-run decisions, which costs can normally be deemed to be irrelevant?

Accepted Answer

A)   fixed costs
B)   total costs
C)   variable costs
D)   relevant costsE) A) and C)
F) C) and D)

Question 20

Use the information below to answer the following questions.
Travel Made Easy Ltd provides three services: International travel, Interstate travel, and Holiday Packages. The results for the year were as follows:  The fixed costs have been shared equally between the three functions.
-Refer to the table above. Travel Made Easy supplies you with the following additional information. The fixed costs consist of $180,000 in rental and $90,000 in utilities and insurance. The floor space occupied by Holiday Packages staff is 15% of the total area and the remainder is shared equally by the other two services. All three services contribute equally to the utilities and insurance expense. Allocating fixed costs based on this information, the profit or loss of the Holiday Packages service would be:

Accepted Answer

A)   a loss of $30,000.
B)   a profit of $30,000.
C)   a loss of $3,000.
D)   a profit of $3,000.E) A) and B)
F) None of the above

Exam 7: Costvolumeprofit Analysis and Marginal Analysis

The income statement for NY Blues is: The break-even point in sales dollars is:

Correct Answer
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If total costs are $80,000 at an output of 12,000 units and $95,000 at 15,000 units, fixed costs are:

Correct Answer
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The vertical axes on a break-even chart and a profit-volume chart respectively, are:

Correct Answer
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Correct Answer
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As output increases, variable costs per unit are:

Correct Answer
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Variable costs are represented graphically as:

Correct Answer
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Which organisation is more likely to be highly operationally geared?

Correct Answer
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Which of these is a limitation in applying break-even analysis?

Correct Answer
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For short-run decisions, which costs can normally be deemed to be irrelevant?

Correct Answer
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Management's concern about 'scarce resources' is primarily due to:

Correct Answer
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Fixed costs are represented graphically as:

Correct Answer
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When contribution margin per unit increases:

Correct Answer
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Correct Answer
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Correct Answer
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Variable costs per unit are also known as:

Correct Answer
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Correct Answer
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High operating gearing refers to:

Correct Answer
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Sales revenue per unit less variable costs per unit is known as:

Correct Answer
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Correct Answer
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Exam 7: Costvolumeprofit Analysis and Marginal Analysis

The income statement for NY Blues is: The break-even point in sales dollars is:

Correct AnswerverifiedShow Answer

If total costs are $80,000 at an output of 12,000 units and $95,000 at 15,000 units, fixed costs are:

Correct AnswerverifiedShow Answer

The vertical axes on a break-even chart and a profit-volume chart respectively, are:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As output increases, variable costs per unit are:

Correct AnswerverifiedShow Answer

Variable costs are represented graphically as:

Correct AnswerverifiedShow Answer

Which organisation is more likely to be highly operationally geared?

Correct AnswerverifiedShow Answer

Which of these is a limitation in applying break-even analysis?

Correct AnswerverifiedShow Answer

For short-run decisions, which costs can normally be deemed to be irrelevant?

Correct AnswerverifiedShow Answer

Management's concern about 'scarce resources' is primarily due to:

Correct AnswerverifiedShow Answer

Fixed costs are represented graphically as:

Correct AnswerverifiedShow Answer

When contribution margin per unit increases:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Variable costs per unit are also known as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

High operating gearing refers to:

Correct AnswerverifiedShow Answer

Sales revenue per unit less variable costs per unit is known as:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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