30 Questions
Which of the following is an example of an indirect manufacturing cost?
Plant rent
What term is used to describe costs that can be saved by not adopting a given alternative?
Avoidable costs
Which of the following best describes relevant costs for decision-making?
Future costs and revenues that will be impacted by a decision
What are avoidable and unavoidable costs also known as?
Relevant and irrelevant costs
Which of the following is an example of a direct manufacturing labor cost?
Compensation of all manufacturing labor
What do sunk costs represent?
Costs of resources already acquired that are unaffected by choices
What happens to the fixed cost per unit as the activity level goes up?
Decreases
In the short term, what is the nature of some costs?
Fixed
Which type of cost is all cost in the income statement other than cost of goods sold considered as?
Period costs
What do period costs represent according to the text?
Costs treated as expenses of the period incurred
What are direct materials costs according to the text?
All materials that become part of the cost object
In what time period does the classification of costs state that all costs are variable?
Long term
What is the relationship between sales and operating income according to the text?
Small decreases in sales lead to large decreases in operating income.
How does a higher value of operating leverage affect profits?
It indicates higher risk as a given change in sales has a greater impact on profits.
Why do managers examine 'what-if' possibilities and alternatives?
To make better decisions
How do managers make better decisions according to the text?
By analyzing what-if scenarios
Which factor affects the level of operating leverage each firm chooses?
Competitive strategy
What do Procter & Gamble managers wonder about when considering expanding into a foreign market?
Effect on selling price
What was the design of the stage used by U2 during their recent world tour?
164-foot high stage with a spaceship design
What stage configuration did the tour employ to maximize revenue?
In-the-round stage configuration
What did Rolling Stone magazine refer to U2's recent world tour as?
The biggest rock show ever
How did U2's ticket pricing strategy differ from other large outdoor concerts?
Tickets were sold for as little as $30
What led to companies like US Airways and Global Crossing declaring bankruptcy?
Decline in revenues and high fixed costs
Why did U2 have three separate stages for their global itinerary during the tour?
To leapfrog and cover different locations simultaneously
What was the approximate cost of each stage used by U2 during their world tour?
$40 million dollars
What assumption is required for multi-product CVP analysis?
Constant sales mix between products
Why was the success of U2's world tour not solely dependent on each night's concert performance?
To recoup its high fixed costs
How did U2's revenue generation compare to industry trends during the tour?
Shattered attendance records despite industry slump
What was a critical factor for U2 to make a profit during their world tour?
Selling a large number of tickets
Why is it crucial for capital intensive companies to cover high fixed costs?
To avoid bankruptcy
Learn about the classification of costs based on behavior in accounting. Understand the characteristics of variable costs and fixed costs, as well as the impact of activity level on cost per unit. Explore how costs can vary in the short term versus the long term.
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