ACC 241 EXAM 2 WITH COMPLETE
QUESTIONS AND ANSWERS
(GRADED A)
Cost Equation - ANSWER - mathematical equation for a straight line, to predict total
cost
can be mathematically expressed: total variable cost (y) = variable cost per unit of
activity (v) X Volume of activity (x)
key characteristics of mixed costs - ANSWER - -TOTAL mixed costs increase as
volume increases because of the variable cost component
-mixed costs PER UNIT decrease as volume increases because of the fixed cost
component
-total mixed costs graphs slope upward but do NOT begin at the origin -- they
intersect the y-axis at the level of fixed costs
-total mixed costs can be expressed as a COMBINATION of the variable and fixed
cost equations
Total Mixed Cost equation - ANSWER - total mixed costs = variable cost component
+ fixed cost component
y = vx + f
where,
y= total mixed costs
v= variable cost per unit of activity (slope)
x= volume of activity
f= fixed cost over a given period of time (vertical intercept)
Four methods to analyze cost behavior - ANSWER - Account analysis
scatter plots
high-low method
regression analysis
, ordered from least to most accurate
overall reason for understanding cost behavior and estimating - ANSWER - essential
to planning, controlling and decision making; not understanding can lead to bad
decisions
eg. should we accept a special order, drop a product line, etc.
cost behavior - ANSWER - describes how a cost behaves or changes as the amount
of output (activity) changes
relevant range - ANSWER - the range over which the cost relationships are expected
to be valid for the normal operations of the firm
Variable costing - ANSWER - -assigns only variable manufacturing costs to products
(DM, DL, and Variable MOH)
-fixed manufacturing overhead = period cost
-for internal management decisions
-contribution margin income statement
Contribution Margin Income statement - ANSWER - Total Per Unit Ratio
sales revenue---- $XX,XXX $XX 100%
(-) variable expenses- XX,XXX XX XX%
(product and period)
(=) Contribution X,XXX X XX%
Margin
(-) Fixed expenses X,XXX
Operating income $ XXX
CVP (cost, volume, profit) Assumptions - ANSWER - 1) costs are linear throughout
relevant range
2) revenues are linear in relevant range
QUESTIONS AND ANSWERS
(GRADED A)
Cost Equation - ANSWER - mathematical equation for a straight line, to predict total
cost
can be mathematically expressed: total variable cost (y) = variable cost per unit of
activity (v) X Volume of activity (x)
key characteristics of mixed costs - ANSWER - -TOTAL mixed costs increase as
volume increases because of the variable cost component
-mixed costs PER UNIT decrease as volume increases because of the fixed cost
component
-total mixed costs graphs slope upward but do NOT begin at the origin -- they
intersect the y-axis at the level of fixed costs
-total mixed costs can be expressed as a COMBINATION of the variable and fixed
cost equations
Total Mixed Cost equation - ANSWER - total mixed costs = variable cost component
+ fixed cost component
y = vx + f
where,
y= total mixed costs
v= variable cost per unit of activity (slope)
x= volume of activity
f= fixed cost over a given period of time (vertical intercept)
Four methods to analyze cost behavior - ANSWER - Account analysis
scatter plots
high-low method
regression analysis
, ordered from least to most accurate
overall reason for understanding cost behavior and estimating - ANSWER - essential
to planning, controlling and decision making; not understanding can lead to bad
decisions
eg. should we accept a special order, drop a product line, etc.
cost behavior - ANSWER - describes how a cost behaves or changes as the amount
of output (activity) changes
relevant range - ANSWER - the range over which the cost relationships are expected
to be valid for the normal operations of the firm
Variable costing - ANSWER - -assigns only variable manufacturing costs to products
(DM, DL, and Variable MOH)
-fixed manufacturing overhead = period cost
-for internal management decisions
-contribution margin income statement
Contribution Margin Income statement - ANSWER - Total Per Unit Ratio
sales revenue---- $XX,XXX $XX 100%
(-) variable expenses- XX,XXX XX XX%
(product and period)
(=) Contribution X,XXX X XX%
Margin
(-) Fixed expenses X,XXX
Operating income $ XXX
CVP (cost, volume, profit) Assumptions - ANSWER - 1) costs are linear throughout
relevant range
2) revenues are linear in relevant range
