SET C

1. The primary purpose of management advisory services is:

A. To conduct special studies, preparation of recommendations, development of plans and
programs, and provision of advice and assistance in their implementation.
B. To provide services or to fulfill some social need.
C. To improve the client’s use of its capabilities and resources to achieve the objectives of the
organization.
D. To earn the best rate of return on resources entrusted to its care with safety of investment
being taken into account and consistent with the firm’s social and legal responsibilities.
2. Total revenues is subtracted from total variable costs to calculate

A. revenue margin
B. variable margin
C. contribution margin
D. divisor margin

3. Opportunity costs:
A. Are treated as period costs under variable costing.
B. Have already been incurred as a result of past action.
C. Are benefits that could have been obtained by following another course of action.
D. Do not vary among alternative courses of action.
4. The following characterize management advisory services except:
A. involve decision for the future
B. broader in scope and varied in nature
C. utilize more junior staff than senior members of the firm
D. relate to specific problems where expert help is required

5. A firm's fixed costs are $54,000, and it sold 350 units at $140 each. The total variable
costs were $35,000. The net income or loss of the firm was:

a. $40,000 loss
b. $40,000 income
c. $14,000 income
d. $ 9,000 loss

6. The dollar sales necessary to achieve a target income of $21,000 after taxes of 30% is
$450,000. The fixed costs are $240,000. What is the contribution ratio (to the nearest
tenth)?

a. 53.3%
b. 65.0%
c. 58.0%
d. 60.0%
7. If a firm's margin of safety is 35% on sales of $200,000, then its margin of safety on
sales of $300,000 will be (assume fixed costs, the variable cost per unit, and the sales
price per unit do not change):

a. $105,000
b. $170,000
c. $100,000
d. $ 35,000

8.) Which of the following costs remain constant in total when the level of the activity driver
varies?
a. conversion costs
b. direct costs
c. fixed costs
d. mixed costs
e. variable costs

9.) Which of the following is the best definition of a step-fixed cost?

a. It is a cost that is constant in total over the relevant range.
b. It is a cost that varies in total in direct proportion to changes in activity.
c. It is a cost that follows a step-cost behavior with narrow steps.
d. It is a cost that follows a step-cost behavior with wide steps.
e. It is a cost that measures activity usage in steps—first, the fixed cost of resources
used; then, the fixed cost of unused capacity.

10.) The variable whose value is based on the value of another variable is the:
a. activity variable.
b. dependent variable.
c. independent variable.
d. intercept parameter.
e. slope parameter.

11.) Almost Company had setup costs totaling $265,000 when 2,750 setups were performed.
When 3,500 setups were performed, setup costs totaled $310,000. Determine the fixed
and variable cost breakdown for setup costs.
Fixed Variable
a. $ (1,666.67) $ 16.67
b. 475,000.00 (60.00)
c. 100,000.00 60.00
 d. 12,000.00 92.00
e. (12,000.00) 92.00
12.) Colfax, Inc., had packaging costs of $150,000 when 12,500 packages were shipped.
Packaging costs were $190,000 when 17,500 packages were shipped. The variable
costs were:
a. $8.00.
b. $10.86.
c. $11.33.
d. $12.00.
e. none of the above.

13.) The amount of activity capacity used in producing the organization’s output is:
a. practical capacity.
b. resource spending.
c. resource usage.
d. unused capacity.
e. none of the above.

14.) The item that corresponds to the variable cost per unit of activity is the:
a. activity variable.
b. dependent variable.
c. independent variable.
d. intercept parameter.
e. slope parameter.
15.) Variable costs are:
A. Sunk costs.
B. Multiplied by fixed costs.
C. Costs that change with the level of production.
D. Defined as the change in total cost resulting from the production of an additional unit
of output.

16. When using conventional cost-volume-profit analysis, some assumptions about costs
and sales prices are made. Which one of the following is not one of those assumptions?

a. the costs can be expressed as straight lines in a break-even graph

b. the actual variable cost per unit must vary over the production range
c. the sales price will remain unchanged per unit
d. fixed costs will decrease per unit
17. Data from a company's last period of operations shows sales of 2,000 units, total
contribution margin of $50,000, and income after subtracting fixed costs of $30,000 is
$20,000. Should the company experience sales of 2,400 units (within the relevant range,
no sales price increase), net income will be:

a. $40,000
b. $30,000
c. $10,000
d. $20,000

18. If variable cost per unit is $25 and quantity of units sold is 5000, then total variable
cost would be

A. $155,000
B. $125,000
C. $135,000
D. $145,000

19. Variable cost is subtracted from fixed costs to calculate

A. unit income
B. fixed income
C. operating income
D. marginal income

20. If variable cost per unit is $29 and quantity of units sold is 5000, then total variable
cost would be

A. $155,000
B. $125,000
C. $135,000
D. $145,000