MANAGERIAL ACCOUNTING - TRUE OR FALSESTATEMENTS.
(PLEASE SKIP IF YOU ARE NOT ABLE TO ANSWER THEM ALL.THANK YOU!)
- If volume increases, all costs will increase.
- The relevant range of activity is the activity level where thefirm will earn income.
- The high-low method is used in classifying a mixed cost intoits variable and fixed elements.
- Contribution margin is the amount of revenues remaining afterdeducting cost of goods sold.
- Both variable and fixed costs are included in calculating thecontribution margin.
- The break-even point is where total sales equal total variablecosts.
- If the unit contribution margin is $1 and unit sales are 10,000units above the break-even volume, then net
income willbe $10,000.
- The contribution margin ratio of 40% means that 60 cents ofeach sales dollar is available to cover fixed costs and to producea profit.
- The margin of safety ratio is equal to the margin of safety indollars divided by the actual or (expected) sales.
- If the activity index decreases, total variable costs willdecrease proportionately.
- A mixed cost has both selling and administrative costelements.
- The difference between the costs at the high and low levels ofactivity represents the fixed cost element of a mixed cost.
- Unit contribution margin is the amount that each unit soldcontributes towards the recovery of fixed costs and to income.
- Net income can be increased or decreased by changing the salesmix.
- If a company has limited machine hours available forproduction, it is generally more profitable to produce and sell theproduct with the highest contribution margin per machine hour.
- According to the theory of constraints, a company must identifyits constraints and find ways to reduce or
eliminate them.
- Cost structure refers to the relative proportion of productversus period costs that a company incurs.
- Variable costing is the approach used for external reportingunder generally accepted accounting principles.
- The difference between absorption costing and variable costingis the treatment of fixed manufacturing
overhead.
- Manufacturing cost per unit will be higher under variablecosting than under absorption costing.
- When absorption costing is used for external reporting,variable costing can still be used for internal reportingpurposes.
- Sales mix is a measure of the percentage increase in sales fromperiod to period.
- If a company has limited machine hours available forproduction, it is generally more profitable to produce and sell theproduct with the highest contribution margin per machine hour.
- Cost structure refers to the relative proportion of fixedversus variable costs that a company incurs.
