Chapter 6-11 Study Questions

Chapter 6-11 Study - 34 An increase in the level of activity will have the following effects on unit costs for variable and fixed costs Unit

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34. 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 a. Increase, Decrease b. Remains constant Remains constant c. Decrease Remains constant d. Remains constant Decrease 40. If a firm increases its activity level, a. costs should remain the same. b. most costs will rise. c. no costs will remain the same. d. some costs will change, others will remain the same. 44. If the activity level increases 10%, total variable costs will a. remain the same. b. increase by more than 10%. c. decrease by less than 10%. d. increase 10%. 45. Which of the following costs are variable? Cost 5,000 Units 15,000 Units 1 $100,000 $300,000 2 40,000 240,000 3 90,000 90,000 4 50,000 150,000 a. 1 and 2. b. 1 and 4. c. only 1. d. only 2. 50. Firms operating at 100% capacity a. are common. b. are the exception rather than the rule. c. have no fixed costs. d. have no variable costs. 56. At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $6,000. Using the high-low method, the estimated fixed cost element of power costs is a. $12,000. b. $6,000. c. $3,600. d. $8,400. 57. Wynne Company’s high and low level of activity last year was 60,000 units of product produced in May and 20,000 units produced in November. Machine maintenance costs were $39,000 in May and $15,000 in November. Using the high-low method, determine an estimate of total maintenance cost for a month in which production is expected to be 45,000 units. a. $33,750. b. $36,000. c. $29,250. d. $30,000. 61. If American Airlines cuts its domestic fares by 30%, a. its fixed costs will decrease. b. profit will increase by 30%. c. a profit can only be earned by decreasing the number of flights. d. a profit can be earned either by increasing the number of passengers or by decreasing variable costs. Use the following information for questions 62–63. Month Miles Total Cost January 80,000 $135,000 February 50,000 100,000 March 70,000 120,000 April 90,000 160,000 62. In applying the high-low method, which months are relevant? a. January and February b. January and April c. February and April d. February and March 63. In applying the high-low method, what is the unit variable cost? a. $1.60. b. $1.50. c. $1.80. d. cannot be determined from the information given. 68. In CVP analysis, the term “cost” a. includes only manufacturing costs. b. means cost of goods sold. c. includes manufacturing costs plus selling and administrative expenses. d. excludes all fixed manufacturing costs. 75. If a company had a contribution margin of $200,000 and a contribution margin ratio of 40%, total variable costs must have been a. $300,000. b.
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This note was uploaded on 10/07/2009 for the course ACCT 301 taught by Professor Cindyphan during the Spring '09 term at DeVry Sherman Oaks.

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Chapter 6-11 Study - 34 An increase in the level of activity will have the following effects on unit costs for variable and fixed costs Unit

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