1.

STATEMENT 1: To estimate what the profit will be at various levels of activity, a manager can simply take the
number of units to be sold over the break-even point and multiply that number by the unit contribution margin.
STATEMENT 2: If sales volume increases, and all other factors remain unchanged, the contribution margin ratio
will decrease.
A. Statements 1 and 2 are both TRUE
C. Only statement 1 is TRUE.
B. Statements 1 and 2 are both FALSE.
D. Only statement 2 is TRUE.
2. The type of system most likely to be used to initially record the daily processing of transactions is
A. Transaction processing system.
C. Decision support system.
B. Management information system.
D. Executive information system.
3. A single-product company prepares income statements using both absorption and variable costing methods.
Manufacturing overhead cost applied per unit produced in 2009 was the same as in 2008. The 2009 variable costing
statement reported a profit whereas the 2009 absorption costing statement reported a loss. The difference in reported
income could be explained by units produced in 2009 being
A. Less than units sold in 2009.
B. Less than the activity level used for allocating overhead to the product.
C. In excess of the activity level used for allocating overhead to the product.
D. In excess of units sold in 2009.
4. The WORST method of allocating service department costs is
A. to allocate total actual costs based on actual use of the service.
B. to allocate total budgeted costs based on long-term expected use of the service.
C. to allocate total budgeted costs based on actual use of the service.
D. none of the above, because all the above are equally undesirable.
5. Product CHEMICAL X is one of the joint products in a joint manufacturing process. Management is studying
whether to sell CHEMICAL X at the split-off point or to process CHEMICAL X further into Cleenix. The following
data have been gathered:
I.
Selling price of CHEMICAL X
II.
Variable cost of processing CHEMICAL X into Cleenix.
III.
The avoidable fixed costs of processing CHEMICAL X into Cleenix.
IV.
The selling price of Cleenix.
V.
The joint cost of the process from which CHEMICAL X is produced.
Which of the above items are relevant in a decision of whether to sell the CHEMICAL X as is or process it further
into Cleenix?
A. I, II, and IV.
B. I, II, III, and IV.
C. II, III, and V.
D. I, II, III, and V.