Q. In budgeting, what does a 'flexible budget' allow for?
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A.
Adjusting for actual activity levels
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B.
Setting fixed costs
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C.
Comparing with historical data
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D.
Eliminating variable costs
Solution
A flexible budget adjusts for actual activity levels, providing a more accurate comparison.
Correct Answer:
A
— Adjusting for actual activity levels
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Q. In cost-volume-profit (CVP) analysis, what does the contribution margin represent?
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A.
Total sales revenue
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B.
Total fixed costs
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C.
Sales revenue minus variable costs
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D.
Net profit
Solution
The contribution margin is calculated as sales revenue minus variable costs.
Correct Answer:
C
— Sales revenue minus variable costs
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Q. What is the break-even point in sales dollars?
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A.
Fixed costs divided by contribution margin ratio
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B.
Total costs divided by total sales
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C.
Total variable costs divided by contribution margin
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D.
Sales revenue minus total costs
Solution
The break-even point in sales dollars is calculated by dividing fixed costs by the contribution margin ratio.
Correct Answer:
A
— Fixed costs divided by contribution margin ratio
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Q. What is the break-even point in units?
-
A.
Total fixed costs divided by contribution margin per unit
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B.
Total variable costs divided by selling price
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C.
Total sales revenue divided by total costs
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D.
Total fixed costs divided by selling price
Solution
The break-even point in units is calculated by dividing total fixed costs by the contribution margin per unit.
Correct Answer:
A
— Total fixed costs divided by contribution margin per unit
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Q. What is the primary objective of cost control?
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A.
Maximizing revenue
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B.
Minimizing costs
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C.
Ensuring product quality
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D.
Increasing market share
Solution
Cost control aims to minimize costs while maintaining the desired level of output.
Correct Answer:
B
— Minimizing costs
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Q. Which of the following costs is considered a sunk cost?
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A.
Future marketing expenses
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B.
Past research and development costs
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C.
Current production costs
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D.
Future labor costs
Solution
Sunk costs are past costs that have already been incurred and cannot be recovered, such as past research and development costs.
Correct Answer:
B
— Past research and development costs
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Q. Which of the following is a variable cost?
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A.
Rent of factory building
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B.
Salaries of permanent staff
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C.
Direct materials used in production
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D.
Depreciation on machinery
Solution
Direct materials vary with the level of production, making them a variable cost.
Correct Answer:
C
— Direct materials used in production
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Q. Which term describes costs that can be directly traced to a specific product?
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A.
Indirect costs
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B.
Direct costs
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C.
Fixed costs
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D.
Variable costs
Solution
Direct costs can be directly traced to a specific product, unlike indirect costs.
Correct Answer:
B
— Direct costs
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