# Chapter 3 Cost Accounting

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Test Bank Practice

### 21. Cost-volume-profit (CVP) analysis is a simple but powerful tool to assist management make operating decisions. Which of the following does not represent a potential use of CVP analysis? A. Ability to compute the break-even point. B. Ability to determine optimal sales volumes. C. Aids in evaluating tax planning alternatives. D. Aids in determining optimal pricing policies.

C. Aids in evaluating tax planning alternatives.

### 22. Which of the following would not cause the break-even point to change? A. Sales price increases. B. Fixed cost decreases. C. Sales volume decreases. D. Variable costs per unit increases. E. Product mix shifts towards the cheaper products.

C. Sales volume decreases.

### 23. If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the break-even point respectively? A. a B. b C. c D. d

B. b (Increased/Decreased)

B. decrease

### 25. Expense A is a fixed cost expense, B is a variable cost. During the current year the volume of output has decreased. In terms of cost per unit of output, we would expect that A. expense A has remained unchanged. B. expense B has decreased. C. expense A has decreased. D. expense B has remained unchanged.

D. expense B has remained unchanged.

### 26. If both the variable cost per unit and the selling price per unit decrease, the new contribution margin ratio in relation to the old contribution margin ratio will be: A. Lower. B. Higher. C. Unchanged. D. Not enough information to tell.

D. Not enough information to tell.

### 27. A company's break-even point will not be increased by: A. an increase in total fixed costs. B. a decrease in the selling price per unit. C. an increase in the variable cost per unit. D. a decrease in the contribution margin ratio. E. an increase in the number of units produced and sold.

E. an increase in the number of units produced and sold.

### 28. Which of the following changes to a company's contribution income statement will always lower the break-even point (either in units or in dollars)? A. Sales price increases by 10%. B. Sales price decreases by 5%. C. Variable costs increase by 10% and fixed costs decrease by 5%. D. Variable costs decrease by 5% and fixed costs increase by 10%.

A. Sales price increases by 10%.

C. fixed costs.

### 30. A decrease in the margin of safety would be caused by a(n): A. increase in the total fixed costs. B. increase in total revenue (sales). C. decrease in the break-even point. D. decrease in the variable cost per unit.

A. increase in the total fixed costs.

A. \$.50

B. \$636,364.

A. \$729,027.

D. \$3,000.

D. \$170,000.

C. \$39.58

B. \$2.33.

A. \$2,250,000.

D. \$1,375.

C. 25.0%.

C. 6,600

### 42. Breakeven analysis assumes that over the relevant range (CPA adapted): A. Total Fixed Costs are nonlinear. B. Total Costs are unchanged. C. Unit Variable Costs are unchanged. D. Unit Revenues are nonlinear.

C. Unit Variable Costs are unchanged.

D. Fixed costs

### 44. On January 1, 2006, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Lake's budgeted break-even point and budgeted margin of safety? (CPA adapted) A. a B. b C. c D. d

B. b (Increase/Decrease)

B. \$135.00

C. \$50,000

A. \$300,000

D. \$1,080,000

C. \$10.00.

B. 19,250 units.

A. 22,600 units.

D. \$229,500.

D. 22,500 units

C. 25,000 units

B. 7,500 units

D. \$1,233,333

A. \$1,400,000

B. \$266,667

B. \$1,000,000

C. \$1,500,000

A. \$200,000

A. \$250,000

C. \$285,714

B. \$312,500

A. \$500,000

### 66. Which of the following would not cause the break-even point to change? A. Sales price increases. B. Sales volume increases. C. Fixed cost increases. D. Variable costs per unit decreases. E. Product mix shifts towards the cheaper products.

B. Sales volume increases.

### 67. Which of the following would not cause the break-even point to change? A. Variable costs per unit increases. B. Fixed costs increases. C. Product mix shifts towards the more expensive products. D. Sales volume decreases.

D. Sales volume decreases.

### 68. If the fixed costs for a product increase and the variable costs (as a percentage of sales dollars) increase, what will be the effect on the contribution margin ratio and the break-even point respectively? A. a B. b C. c D. d

A. a (decreased/Increased)

### 69. A company's break-even point will not be increased by: A. an increase in the number of units produced and sold. B. a decrease in the selling price per unit. C. an increase in the variable cost per unit. D. an increase in the variable cost ratio. E. an increase in total fixed costs.

A. an increase in the number of units produced and sold.

### 70. A company's break-even point will not be changed by: A. a change in total fixed costs. B. a change in the selling price per unit. C. a change in the variable cost per unit. D. a change in the contribution margin ratio. E. a change in the income tax rate.

E. a change in the income tax rate.

### 71. A company's break-even point will not be changed by: A. a change in total fixed costs. B. a change in the number of units produced and sold. C. a change in the variable cost ratio. D. a change in the contribution margin ratio. E. a change in the product mix.

B. a change in the number of units produced and sold.

### 72. If both the variable cost per unit and the selling price per unit increase, the new contribution margin ratio in relation to the old contribution margin ratio will be: A. Lower. B. Higher. C. Unchanged. D. Not enough information to tell.

D. Not enough information to tell.

B. 49.3%

C. \$1,724,138.

A. \$477,500.

D. \$2,168,225.

D. \$1,800.

B. \$20,400.

C. \$25,200.

C. \$1,600,000

C. \$2,400,000

B. \$600,000

B. \$416,667

A. \$83,333

C. \$729,167

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