Test bank and solution manual for ch02 cost behavior operationg leverage (2)
➤ Gửi thông báo lỗi ⚠️ Báo cáo tài liệu vi phạmNội dung chi tiết: Test bank and solution manual for ch02 cost behavior operationg leverage (2)
Test bank and solution manual for ch02 cost behavior operationg leverage (2)
Chapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)olume of activity changes but on a per unit basis varies inversely with changes in volume of activity. A variable cost is a cost that in total changes directly and proportionately with changes in volume of activity but on a per unit basis is constant as volume of activity changes. An example of a fi Test bank and solution manual for ch02 cost behavior operationg leverage (2)xed cost is a supervisor’s salary in relation to units produced. An example of a variable cost is direct materials cost in relation to units produced.Test bank and solution manual for ch02 cost behavior operationg leverage (2)
2Most business decisions are based on cost information. The behavior of cost in relation to volume affects total costs and cost per unit. For example,Chapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)cts a company’s cost structure decisions. Knowing that volume is expected to increase would favor a fixed cost structure because of the potential benefits of operating leverage.3Operating leverage is the condition whereby a small percentage increase in sales volume can produce a significantly higher Test bank and solution manual for ch02 cost behavior operationg leverage (2) percentage increase in profitability. It is the result of fixed cost behavior and measures the extent to which fixed costs are being used. The higherTest bank and solution manual for ch02 cost behavior operationg leverage (2)
the proportion of fixed cost to total cost the greater the operating leverage. As sales increase, fixed cost does not increase proportionately but stChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)The result is the number of times greater the percentage increase in profit is to a percentage increase in sales. For example, if operating leverage is four, a 20% increase in sales will result in an 80% increase in profit.5The concept of operating leverage is limited in predicting profitability bec Test bank and solution manual for ch02 cost behavior operationg leverage (2)ause in practice, changes in sales volume are usually related to changes in sales price, variable costs, and fixed costs, which all affect profitabiliTest bank and solution manual for ch02 cost behavior operationg leverage (2)
ty.44958Chapter 2 Cost Behavior, Operating Leverage, and Profitability Analysis6789With increasing volume a company would benefit more from a fixed coChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)variable cost structure would be more advantageous because costs would decrease proportionately with decreases in volume. With a pure fixed cost structure, costs stay constant even when sales revenue is decreasing, eventually resulting in a loss.Economies of scale are possible when the size of an op Test bank and solution manual for ch02 cost behavior operationg leverage (2)eration is increased. Increases in size correspond to increases in volume, which reduces the unit cost of production because of fixed cost behavior. ETest bank and solution manual for ch02 cost behavior operationg leverage (2)
conomies of scale are found in businesses that are capital intensive (businesses that have a higher percentage of their assets in long-term operationaChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)h increases in volume, since increases in volume reduce fixed costs per unit, thereby increasing profits. The risk involved with fixed costs is that decreases in volume are not accompanied by decreases in costs, eventually resulting in losses.Fixed costs can provide financial rewards with increases Test bank and solution manual for ch02 cost behavior operationg leverage (2)in volume, since increases in volume do not cause corresponding increases in fixed costs. This kind of cost behavior results in increasing profits (deTest bank and solution manual for ch02 cost behavior operationg leverage (2)
creases in cost per unit). But this does not mean that companies with a fixed cost structure will be more profitable. Predominately fixed cost structuChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)959Chapter 2 Cost Behavior, Operating Leverage, and Profitability Analysis10The definitions of both fixed and variable costs are based on volume being within the relevant range (normal range of activity). If volume is outside the relevant range, fixed costs may increase in total if volume increases Test bank and solution manual for ch02 cost behavior operationg leverage (2)require that additional fixed assets be acquired (whereby, depreciation charges would increase). Likewise, variable costs may decrease per unit if incTest bank and solution manual for ch02 cost behavior operationg leverage (2)
reases in volume allow quantity discounts on materials. Increases or decreases in volume that are outside the relevant range can invalidate the definiChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)of a service in advance. They don’t want to wait until after the service is performed to know how much it costs. Average cost is also more relevant for performance evaluation and for control purposes. Knowing the actual cost of each service is usually of little value in evaluating cost efficiency an Test bank and solution manual for ch02 cost behavior operationg leverage (2)d knowing when to take corrective action.12The high-low method is the appropriate method when simplicity is more important than accuracy. Least squareTest bank and solution manual for ch02 cost behavior operationg leverage (2)
s regression is more appropriate when accuracy is more important.13A fixed cost structure would have more risk because profits vary more with changes Chapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2) covered. Given high fixed costs, a company would need high volume to reap the rewards associated with this cost structure.14The president appears to be in error because fixed costs frequently can be changed. For example, fixed costs such as advertising expense, training, and product improvement res Test bank and solution manual for ch02 cost behavior operationg leverage (2)ult from short-term decisions and may be easily changed. While it is more difficult, even fixed costs such as depreciation expense can be reduced andTest bank and solution manual for ch02 cost behavior operationg leverage (2)
changed by selling long-term assets.44960Chapter 2 Cost Behavior, Operating Leverage, and Profitability Analysis151617The statement is false for two rChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)y within which the company normally operates. Accordingly, the definitions of fixed and variable costs only apply within the relevant range. Secondly, even if a business ceases operations and produces zero products, it incurs some fixed costs such as property taxes, maintenance, and insurance.Norel Test bank and solution manual for ch02 cost behavior operationg leverage (2)could calculate the average heating cost by dividing total annual expected heating cost by total annual production. The result could then be multiplieTest bank and solution manual for ch02 cost behavior operationg leverage (2)
d by monthly production to determine the amount of monthly heating cost to assign to inventory. This procedure would have the effect of averaging the Chapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as vo Test bank and solution manual for ch02 cost behavior operationg leverage (2)an to per unit cost. Total fixed cost remains constant regardless of the level of production. Total variable cost increases or decreases as production increases or decreases. Verna is correct in her description of unit cost behavior. She is incorrect about the use of the terms, for the reasons above Test bank and solution manual for ch02 cost behavior operationg leverage (2).Exercise 2-1ARequirementFixedVariableMixed44961Chapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as voChapter 2 Cost Behavior, Operating Leverage, and Profitability AnalysisAnswer to Questions1A fixed cost is a cost that in total remains constant as voGọi ngay
Chat zalo
Facebook