Chapter 22

Variable costs are costs that: (a) vary in total directly and proportionately with changes in the activity level. (b) remain the same per unit at every activity level. (c) Neither of the above. (d) Both (a) and (b) above.

The relevant range is: (a) the range of activity in which variable costs will be curvilinear. (b) the range of activity in which fixed costs will be curvilinear. (c) the range over which the company expects to operate during a year. (d) usually from zero to \(100 \%\) of operating capacity.

Mixed costs consist of a: (a) variable-cost element and a fixed-cost element. (b) fixed-cost element and a controllable-cost element. (c) relevant-cost element and a controllable-cost element. (d) variable-cost element and a relevant-cost element.

Which of the following is not involved in CVP analysis? (a) Sales mix. (b) Unit selling prices. (c) Fixed costs per unit. (d) Volume or level of activity.

When comparing a traditional income statement to a CVP income statement: (a) net income will always be greater on the traditional statement. (b) net income will always be less on the traditional statement. (c) net income will always be identical on both. (d) net income will be greater or less depending on the sales volume.

Contribution margin: (a) is revenue remaining after deducting variable costs. (b) may be expressed as unit contribution margin. (c) is selling price less cost of goods sold. (d) Both (a) and (b) above.

Gossen Company is planning to sell 200,000 pliers for \(\$ 4\) per unit. The contribution margin ratio is \(25 \%\). If Gossen will break even at this level of sales, what are the fixed costs? (a) \(\$ 100,000\). (c) \(\$ 200,000\). (b) \(\$ 160,000\). (d) \(\$ 300,000\).

Margin of safety is computed as: (a) Actual sales - Break-even sales. (b) Contribution margin - Fixed costs. (c) Break-even sales - Variable costs. (d) Actual sales - Contribution margin.

Marshall Company had actual sales of \(\$ 600,000\) when break-even sales were \(\$ 420,000\). What is the margin of safety ratio? (a) \(25 \%\). (c) \(331 / 3 \%\). (b) \(30 \%\). (d) \(45 \%\).

Cournot Company sells 100,000 wrenches for \(\$ 12\) a unit. Fixed costs are \(\$ 300,000\), and net income is \(\$ 200,000\). What should be reported as variable expenses in the CVP income statement? (a) \(\$ 700,000\). (c) \(\$ 500,000\). (b) \(\$ 900,000\). (d) \(\$ 1,000,000\).

Under variable costing, fixed manufacturing costs are classified as: (a) period costs. (b) product costs. (c) both period and product costs. (d) neither period nor product costs.