UOP ACC 561 Week 4 Quiz

 1. A variable cost is a cost that

• may or may not be incurred, depending on management’s discretion.
• occurs at various times during the year.
• varies in total in proportion to changes in the level of activity.
• varies per unit at every level of activity.

2. 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

• Increases  – Decreases
• Remains constant  – Remains constant
• Decreases  – Remains constant
• Remains  constant  – Decreases

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3. A fixed cost is a cost which

• remains constant per unit with changes in the level of activity.
• remains constant in total with changes in the level of activity.
• varies inversely in total with changes in the level of activity.
• varies in total with changes in the level of activity.

4. Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $14 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?

• 80%
• 20%
• 30%
• 70% 

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5. Contribution margin

• is calculated by subtracting total manufacturing costs per unit from sales revenue per unit.
• equals sales revenue minus variable costs.
• is always the same as gross profit margin.
• excludes variable selling costs from its calculation.

6. The equation which reflects a CVP income statement is

• Sales + Fixed costs = Variable costs + Net income.
• Sales – Variable costs + Fixed costs = Net income.
• Sales – Variable costs – Fixed costs = Net income.
• Sales = Cost of goods sold + Operating expenses + Net income. 

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7.A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $150,000. The number of units the company must sell to break even is

• 50,000 units.
• 30,000 units.
• 75,000 units.
• 300,000 units.

8. Only direct materials, direct labor, and variable manufacturing overhead costs are considered product costs when using

• variable costing.
• absorption costing.
• product costing.
• full costing.

9. Under absorption costing and variable costing, how are fixed manufacturing costs treated?

Absorption                 Variable

• Period Cost  – Period Cost
• Product Cost – Product Cost
• Period Cost  – Product Cost
• Product Cost – Period Cost 

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10. Management may be tempted to overproduce when using

• absorption costing, in order to increase net income.
• absorption costing, in order to decrease net income.
• variable costing, in order to increase net income.
• variable costing, in order to decrease net income.

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