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Which costs will change with a decrease in activity within the relevant range. Total fixed costs and total variable costs Unit fixed costs and total variable cost Unit variable cost and unit fixed cost Unit fixed cost and total fixed cost Question 11 An increase in the activity level within the relevant range results in: An increase in fixed cost per unit a proportionate increase in total fixed costs an unchanged fixed cost per unit a decrease in fixed cost per unit The linier equation Y=a+bX is often used to express cost formulas. In this equation the b term represents variable cost per unit of activity. the a term represents variable cost in total the X term represents total cost the Y term represents total fixed cost Question 13 An example of a cost that is variable with respect to the number of units produced and sold is: insurance on the headquarters building power to run production equipment supervisory sales depreciation of factory facilities The cost of goods sold in a merchandising company typically would be classified as a: fixed cost variable cost step-variable cost mixed cost Question 15 1 pts The contribution approach to the income statement: organizes costs on a functional basis is useful to managers in planning and decision making shows a contribution margin rather than a net operating income figure at the bottom of the statement can be used only by manufacturing companies It is a method of separating a mixed cost into its fixed cost and variable elements by fitting a regression line that minimizes the sum of the squared errors. quick and dirty method scattergraph method high-low method least-square regression method Question 17 1 pts Contribution margin is the excess of revenues over cost of goods sold manufacturing cost all direct costs all variable costs On a cost-volume-profit graph, the break-even point is located: at the origin where the total revenue line intersects the volume axis where the total expenses line intersects the peso sales where the total revenue line intersects the total expenses line Question 19 1 pts Once the break-even point is reached the total contribution margin changes from negative to positive net operating income will increase by the unit contribution margin for each additional item sold variable expenses will remain constant in total the contribution margin ratio begins to decrease Assuming that the unit sales are unchanged, the total contribution margin will decrease if fixed expenses increase fixed expenses decrease variable expense per unit increases variable expense per unit decreases Question 21 The ratio of fixed expenses to the unit contribution margin is the: break-even point in unit sales profit margin contribution margin ratio margin of safety To obtain the break-even point in terms of Peso sales, total fixed expenses are divided by which of the following? variable expense per unit variable expense per unit/Selling price per unit fixed expense per unit (Selling price per unit -Variable expense per unit)/Selling price per unit Question 23 The margin of safety is equal to Sales - Net operating income Sales - (variable expense/contribution margin Sales - (Fixed expenses/Contribution margin ratio) If the company A has a higher degree of operating leverage than company B, then, company A has higher variable expenses company A's profits are more sensitive to percentage changes in sales Company A is more profitable Company A is less risky

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