Answer these multiple choice questions.

1. A cost that does not change as the level of business activity changes is a:

a. fixed cost

b. mixed cost

c. variable cost

d. semi-variable cost

2. The break-even point is important to managers because it:

a. tells managers how far sales can decline before the company will incur a loss

b. determines the required sales in dollars to achieve a profit

c. is useful to owners and managers starting a business

d. Answers a and c are both correct.

3. The behavior of a variable cost is the opposite of the behavior of a:

a. fixed cost

b. liquid cost

c. period cost

d. mixed cost

4. If the selling price of an item increases, while all other costs are held constant, the break-even point in units will:

a. increase

b. decrease

c. remain unchanged

d. depend on the original sales price

5. When a cost no longer holds to its cost behavior pattern, the activity may be:

a. a mixed cost

b. a fixed cost

c. an indeterminable cost

d. outside the relevant range

6. The Duchess Bakery makes and sells fresh cookies. If the cookies sell for $1.60 each and they cost $0.85 to make plus an additional 20% of the selling price for selling and administrative variable costs, the variable cost per cookie is (rounded):

a. $0.55

b. $1.06

c. $0.92

d. $1.17

7. The method used to separate mixed costs that uses only two data points (even if more reliable points are available) is called:

a. regression analysis

b. scatter graphing

c. the engineering approach

d. the high-low method

8. After all __________ costs have been covered by the firm's sales, the amount remaining is the called the __________.

a. variable; gross profit

b. cost of goods sold; contribution margin

c. variable; contribution margin

d. fixed; gross margin

9. In the basic mathematical equation, the Yrepresents:

a. total cost

b. fixed cost

c. unit variable cost

d. activity level

10. The main difference between a contribution income statement and a functional income statement is that the functional income statement does not classify costs as:

a. product and period

b. product and mixed

c. period and fixed

d. fixed and variable