Podcast
Questions and Answers
Which of the following scenarios would lead to a decrease in the breakeven point?
Which of the following scenarios would lead to a decrease in the breakeven point?
- An increase in sales volume.
- A decrease in the selling price per unit.
- An increase in variable costs per unit.
- A decrease in fixed costs. (correct)
A company has a high degree of operating leverage. What does this suggest about the company's cost structure and risk?
A company has a high degree of operating leverage. What does this suggest about the company's cost structure and risk?
- High fixed costs, low risk.
- Low fixed costs, high risk.
- High fixed costs, high risk. (correct)
- Low fixed costs, low risk.
How does producing more units than sold affect net income under variable costing, assuming that units produced impacts income?
How does producing more units than sold affect net income under variable costing, assuming that units produced impacts income?
- Net income decreases.
- Net income increases.
- The effect on net income cannot be determined.
- Net income remains the same. (correct)
Which of the following costs is typically considered a period cost?
Which of the following costs is typically considered a period cost?
When making decisions, why is allocating common costs to different segments or departments potentially misleading?
When making decisions, why is allocating common costs to different segments or departments potentially misleading?
A company is deciding whether to drop a product line. Which costs are relevant to this decision?
A company is deciding whether to drop a product line. Which costs are relevant to this decision?
What is the primary difference between absorption costing and variable costing?
What is the primary difference between absorption costing and variable costing?
In a make-or-buy decision, which of the following factors should be considered?
In a make-or-buy decision, which of the following factors should be considered?
What is the key characteristic of a sunk cost?
What is the key characteristic of a sunk cost?
When operating with a constrained resource, how should a company maximize profit?
When operating with a constrained resource, how should a company maximize profit?
Flashcards
Breakeven Point
Breakeven Point
The quantity of sales needed to cover all costs.
Margin of Safety
Margin of Safety
The difference between actual or expected sales and sales at the breakeven point.
Degree of Operating Leverage
Degree of Operating Leverage
A measure of how sensitive net operating income is to a percentage change in sales.
Avoidable Costs
Avoidable Costs
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Sunk Cost
Sunk Cost
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Opportunity Cost
Opportunity Cost
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Traceable Costs
Traceable Costs
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Common Costs
Common Costs
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Joint Product Decision
Joint Product Decision
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Study Notes
Quiz 2 Study Guide
- Quiz contains 50 points total
- MC/TF questions each worth 2 points (25 points total)
- Contains 7 calculation problems
- Plus 18 concept/definition questions
- Calculation problem examples can be found on Connect as “Quiz 2 Practice Problems”
Chapter 5 Concepts/Definitions
- Know Breakeven in units formula
- Define and understand Margin of safety
- Define and understand degree of operating leverage
- Understand impact on breakeven when sales and/or variable costs change
Chapter 5 Calculation Problems
- Ability to calculate profit given contribution margin ratio, sales, and fixed expenses
- Calculate total contribution margin with change in sales
- Calculate fixed expenses given selling price and variable expenses per unit
Chapter 6 Concepts/Definitions
- Allocation of common costs to segments is not useful
- Know the difference between common costs and traceable costs
- Understand absorption costing vs variable costing
- How changes in units produced impacts income under variable costing when units sold is constant
- Understand what is classified as a product and period cost under variable costing
Chapter 6 Calculation Problems
- Calculate total period costs under variable costing
- Calculate common fixed expenses given segment margins and net income
Chapter 13 Concepts/Definitions
- Define avoidable costs
- Define sunk costs
- Define opportunity costs
- Understand a joint product decision
- Understand how to maximize profit with a constrained resource
- Sunk cost vs avoidable cost
Chapter 13 Calculation Problems
- Calculate financial advantage (disadvantage) for keeping or dropping a segment
- Calculate financial advantage (disadvantage) for making or buying decision
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