1) Which of the following is a variable cost?
A) property taxes
B) salary of plant manager
C) direct materials cost
D) straight-line depreciation expense
2) Variable cost per unit, within the relevant range, will ________.
A) increase as production decreases
B) decrease as production decreases
C) remain the same as production levels change
D) decrease as production increases
3) Which of the following statements is true of the behavior of total variable costs, within the relevant range?
A) They will decrease as production increases.
B) They will remain the same as production levels change.
C) They will decrease as production decreases.
D) They will increase as production decreases.
4) Which of the following statements is true of the behavior of total fixed costs, within the relevant range?
A) They will remain the same as production levels change.
B) They will increase as production decreases.
C) They will decrease as production decreases.
D) They will decrease as production increases.
5) The fixed costs per unit will ________.
A) increase as production decreases
B) decrease as production decreases
C) remain the same as production levels change
D) increase as production increases
6) The dollar amount that provides for covering fixed costs and then provides for operating income is called ________.
A) variable cost
B) total cost
C) contribution margin
D) margin of safety
7) Contribution margin ratio is the ratio of contribution margin to ________.
A) net sales revenue
B) cost of goods sold
C) total variable costs
D) total fixed costs
8) One of the assumptions of cost-volume-profit (CVP) analysis is that there are no changes in the ________.
A) accounts payable
B) cash balance
C) inventory levels
D) accounts receivables
9) ________ is a “what if” technique that estimates profit or loss results if selling price, costs, volume, or underlying assumptions change.
A) High-low method of analysis
B) Sensitivity analysis
C) Contribution margin
D) Operating leverage
10) When the total fixed costs increases, the contribution margin per unit ________.
A) increases
B) decreases
C) increases proportionately
D) remains the same
11) Which of the following statements is true of the budgeting process?
A) It includes the qualitative targets of a company.
B) It is a continuous process that encourages communication.
C) It shows the actual performance of the business.
D) It leads to slack where managers understate expected expenses.
12) Which of the following is an example of the planning function of a budget?
A) A budget demands integrated input from different business units and functions.
B) Employees are motivated to achieve the goals set by the budget.
C) Budget figures are used to evaluate the performance of managers.
D) The budget outlines a specific course of action for the coming period.
13) Which of the following is an example of the coordination and communication function of a budget?
A) A budget demands integrated input from different business units and functions.
B) Employees are motivated to achieve the goals set by the budget.
C) Budget figures are used to evaluate the performance of managers.
D) The budget outlines a specific course of action for the coming period.
14) Which of the following is an example of the benchmarking function of a budget?
A) A budget demands integrated input from different business units and functions.
B) Budgeting requires close cooperation between accountants and operational personnel.
C) Budget figures are used to evaluate the performance of managers.
D) The budget outlines a specific course of action for the coming period.
15) An intentional understatement of expected revenues or overstatement of expected expenses by managers in order to have a favorable performance evaluation is known as ________.
A) benchmarking
B) appropriation
C) budgetary slack
D) variance analysis
16) The starting point in the budgeting process is the preparation of the ________.
A) cash budget
B) production budget
C) sales budget
D) budgeted income statement
17) While preparing the budgeted balance sheet of a merchandising company, the amount of merchandise inventory can be obtained from the ________.
A) merchandise inventory account
B) inventory, purchases, and cost of goods sold budget
C) production budget.
D) capital expenditure budget and cash budget
18) While preparing the budgeted income statement of a merchandising company, the amount of cost of goods sold can be taken from the ________.
A) budgeted balance sheet
B) budgeted cash flow statement
C) inventory, purchases, and COGS budget
D) capital expenditures budget.
19) Which of the following budgets focuses on the income statement and its supporting schedules?
A) the operating budget
B) the cash budget
C) the capital expenditures budget
D) the sales budget
20) The ________ details how the business expects to go from the beginning cash balance to the desired ending cash balance.
A) capital expenditures budget
B) budgeted income statement
C) cash flow statement
D) cash budget
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