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Chapter 5 Multichoice Questions

This document contains 10 multiple choice questions about cost-volume-profit analysis and relevant costing. The questions cover topics like variable costs, break-even point, contribution margin, margin of safety, sales mix, differential analysis, qualitative factors in CVP analysis, fixed costs of production, resource constraints, and opportunity costs.

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4 views

Chapter 5 Multichoice Questions

This document contains 10 multiple choice questions about cost-volume-profit analysis and relevant costing. The questions cover topics like variable costs, break-even point, contribution margin, margin of safety, sales mix, differential analysis, qualitative factors in CVP analysis, fixed costs of production, resource constraints, and opportunity costs.

Uploaded by

punithupchar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 5:

COST-VOLUME-PROFIT ANALYSIS AND RELEVANT


COSTING

Multiple choice questions


In each case, select the most appropriate answer.

1 Variable Costs would not include:

a) The wages of factory workers

b) Insurance of factory machinery

c) Materials used in making products

d) Sales commission on the sale of products.

2 Breakeven point is:

a) The volume of production at which total sales equals total costs

b) The minimum amount of profit that should be made

c) The number of units required to be sold to cover variable costs

d) All of a), b) and c)

3 The contribution margin is:

a) The financial contribution each unit makes towards fixed costs

b) The total profit divided by units produced

c) The selling price less direct variable costs per unit

d) Both a) and c)

e) All of a), b) and c)

4 The margin of safety:

a) Should be as low as possible

b) Is the amount by which expected sales exceed the break-even point

c) Is the number of days lost to industrial accidents as a proportion of total days worked

d) Both a) and b)

Nelson Accounting and Finance for WA 3A3B 9780170182058


© Cengage Learning Australia 2010 1
5 The sales mix:

a) Is the weighted average contribution margin of the various products

b) Is the average selling expenses as a proportion of total selling price

c) Is the relative profitability of the various products of a firm

d) Is the proportion of sales of each product in relation to total sales

6 Differential analysis:

a) Can be used to evaluate special orders and make or buy decisions

b) Needs to take account of opportunity costs

c) Both a) and b)

d) Is b) but not a)

7 Qualitative factors in CVP analysis would not include:

a) The relative profitability of alternative products

b) The effect of an alternative on the firm’s competitive position

c) Constraints imposed by law

d) Effects of an alternative decision on customer loyalty

8 Fixed costs of production are:

a) Costs which never change

b) Costs per unit which remain the same regardless of production levels

c) Represented on a graph by a line rising from left to right

d) Unlikely to change as long as a factory is operating within maximum capacity

9 Resource constraints:

a) Are the legal limitations placed on certain production processes

b) Refer to the labour or materials available for producing a good or service

c) Refer to the materials only that are available for producing a good or service

d) Can always be overcome in the long term

10 Opportunity costs are:

a) Future potential benefits not gained as a result of selecting a particular option

b) An inevitable part of the process of considering production alternatives

c) The cost of opening up new markets or producing new products

d) Both a) and b)

e) Both b) and c)

Nelson Accounting and Finance for WA 3A3B 9780170182058


© Cengage Learning Australia 2010 2

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