A) its fixed
cost and variable cost.

B) its fixed
cost only.

C) its
variable cost only.

D) none of
the above.

2. What
percentage of the contribution margin is profit on units sold in excess of the
breakeven point?

A) It’s 50%
to the contribution margin ratio.

B) It’s
equal to the variable cost ratio.

C) It’s
equal of the gross profit ratio.

D) It’s 100%.

3. Which of
the following is a true statement regarding absorption and/or direct costing?

A) A firm can
choose to use either absorption or direct costing for income tax purposes.

B) A firm
can choose to use either absorption or direct costing for financial reporting
purposes.

C) Direct
costing assigns only direct materials and direct labor to products.

D) Absorption
costing includes fixed overhead in product costs whereas direct costing does
not.

E) None of
the above.

4. An
example of a product cost is:

A) advertising
expense for the product.

B) a portion
of the president’s travel expenses.

C) interest
expense on a loan to finance inventory.

D) production
line maintenance costs.

5. The
production cost of a single unit of a manufactured product is determined by:

A) dividing
total direct materials and direct labor for a production run by the number of
units made.

B) dividing
total direct materials, direct labor, and manufacturing overhead for a
production run by the number of units made.

C) dividing
total direct materials, direct labor, manufacturing overhead and selling
expenses for a production run by the number of units made.

D) dividing
the selling price by the gross profit ratio.

6. An
example of a cost that is likely to have a variable behavior pattern is:

A) sales
force salaries.

B) depreciation
of production equipment.

C) salaries
of production supervisors.

D) direct
labor costs.

7. An
example of a cost likely to have a fixed behavior pattern is:

A) sales
force commission.

B) raw
material costs.

C) advertising
costs.

D) electricity
costs for packaging equipment.

8. Which of
the following is not a strong reason for budgeting?

A) Budgets
provide a benchmark for judging performance.

B) Budgeting
requires little effort by non-accounting managers.

C) Budgeting
requires management to plan.

D) Budgeting
requires coordination among the functional areas of the firm.

9. The cash
budget is especially important to a firm when:

A) there is
not a lot of confidence in the sales forecast.

B) it has a
relatively large amount of operating cash.

C) the P/E
ratio has been trending downwards.

D) it may
have to negotiate a short-term bank loan.

10. Which of
the following costs are included in the cost classification that is based on
the relationship between total cost and volume of activity?

A) Variable
cost and fixed cost.

B) Direct
cost and indirect cost.

C) Product
cost and period cost.

D) Committed
cost and discretionary cost.

11. Which of
the following is the last budgeted financial statement to be prepared?

A) Budgeted
income statement.

B) Budgeted
balance sheet.

C) Cash
budget.

D) It doesn’t
matter which one is prepared last.