21. Which of the following would most likely increase when the activity level increases, within the relevant range?
A) Total fixed costs.
B) Per unit fixed costs.
C) Total variable costs.
D) Per unit variable costs.
22. In the cost equation TC = F + VX, F is best described as the:
A) slope of the equation.
B) activity level used to estimate the dependent variable.
C) dependent variable.
D) costs that do not vary with changes in the activity level.
23. Clerical costs in the billing department of Seth Company are a mixture of variable and fixed components. Records indicate that average unit processing costs are $0.50 per account processed at an activity level of 32,000 accounts. When only 22,000 accounts are processed, the total cost of processing is $12,500. Given these data, at a budgeted level of 26,000 accounts:
A) processing costs are expected to total $9,100.
B) fixed processing costs are expected to be $10,400.
C) the variable processing costs are expected to be $0.35 per account processed.
D) processing costs are expected to total $13,000.
24. How would an increase in fixed manufacturing costs and variable selling costs, respectively, affect the contribution margin?
A) Not affect; Not affect.
B) Decrease; Decrease.
C) Decrease; Not affect.
D) Not affect; Decrease.
25. Contribution margin is:
A) sales revenue minus cost of goods sold.
B) sales revenue minus all variable costs.
C) sales revenue minus variable production costs.
D) sales revenue minus all variable and fixed costs.
26. Cost-volume profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing of products, marketing strategy, and use of productive facilities. A calculation used in a CVP analysis is the break-even point. Once the break-even point has been reached, operating income will increase by the:
A) contribution margin per unit for each additional unit sold.
B) fixed cost per unit for each additional unit sold.
C) variable cost per unit for each additional unit sold.
D) none of the above.
27. Edison Company has 5,000 obsolete desk lamps that are carried in inventory at a manufacturing cost of $50,000. If the lamps are reworked for $20,000, they could be sold for $35,000. Alternatively, the lamps could be sold for $8,000 for scrap. In a decision model analyzing these alternatives, the sunk cost would be:
28. Albert Company plans to discontinue a division that generates a total contribution margin of $20,000 per year. Fixed overhead associated with this division is $50,000, of which $5,000 cannot be eliminated. If the division is discontinued, how would Albert's operating income be affected?
A) Have no effect on operating income.
B) Decrease operating income by $15,000.
C) Increase operating income by $25,000.
D) Increase operating income by $30,000.
29. Which of the following is a difference between master budgets for nonprofit organizations and those for other companies?
A) Nonprofit organizations begin their budgeting process with a budget showing the level of service to be provided.
B) Nonprofit organizations prepare budgets showing their anticipated funding.
C) Nonprofit organizations frequently provide services free of charge, thus having no traditional sales budget.
D) All of the above are differences.
30. Bard Company has the following information for next month: planned production of 20,000 units which require 3 gallons of Material A each; beginning inventory of Material A of 4,800 gallons; desired ending inventory of Material A of 6,000 gallons. How much material A needs to be purchased?
A) 21,200 gallons
B) 60,000 gallons
C) 61,200 gallons
D) 70,800 gallons
View the attached word doc if you prefer to view the responses in context.
21. C) Total variable costs because they vary with production
22. D) costs that do not vary with changes in the activity level because they are fixed
23. D) ...
The solution explains how the answers are arrived at.