11) Currently, most companies consider annual salary costs as:
A) a fixed cost.
B) a variable cost.
C) an opportunity cost.
D) a period cost.
12) Which of the following describes a variable cost?
A) Variable cost are always indirect costs.
B) Variable costs increase in total when the actual level of activity increases.
C) Variable costs include most personnel costs and depreciation on machinery.
D) Variable costs can always be traced directly to the cost object.
13) Describe a variable cost. Describe a fixed cost. Explain why the distinction between variable and fixed costs is important in management accounting.
1) Break-even point is NOT an important concept since the goal of business is to make a profit.
2) To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components.
3) Cost-volume-profit analysis may be used for single-product and multiproduct analysis but not in a service environment.
4) Selling price per unit is $60, variable cost per unit is $30, and fixed cost per unit is $20. When this company operates above the break-even point, the sale of one more unit will increase net income by $10.
5) A company with sales of $100,000, variable costs of $70,000, and fixed costs of $50,000 will reach its break-even point if sales are increased by $20,000.
6) In multiproduct situations when the sales mix shifts toward the product with the lowest contribution margin per unit, the break-even quantity will decrease.