ACC 561 Week 4 Quiz
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1. A variable cost is a cost that
• may or may not be incurred, depending on management's discretion.
• occurs at various times during the year.
• varies in total in proportion to changes in the level of activity.
• varies per unit at every level of activity.
2. An increase in the level of activity will have the following effects on unit costs for variable and fixed costs:
Unit Variable Cost Unit Fixed Cost
• Increases Decreases
• Remains constant Remains constant
• Decreases Remains constant
• Remains constant Decreases
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3. A fixed cost is a cost which
• remains constant per unit with changes in the level of activity.
• remains constant in total with changes in the level of activity.
• varies inversely in total with changes in the level of activity.
• varies in total with changes in the level of activity.
4. Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $14 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?
• 80%
• 20%
• 30%
• 70%
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5. Contribution margin
• is calculated by subtracting total manufacturing costs per unit from sales revenue per unit.
• equals sales revenue minus variable costs.
• is always the same as gross profit margin.
• excludes variable selling costs from its calculation.
6. The equation which reflects a CVP income statement is
• Sales + Fixed costs = Variable costs + Net income.
• Sales – Variable costs + Fixed costs = Net income.
• Sales – Variable costs – Fixed costs = Net income.
• Sales = Cost of goods sold + Operating expenses + Net income.
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7.A company sells a product which has a unit sales price of...