Question

1. As the total volume of activity changes:

a. the total of variable costs stays the same.

b. the total of fixed costs changes.

c. variable costs per unit change.

d. fixed costs per unit change.

2. ABC Company's sales are $100,000, fixed costs are $50,000, and variable costs are $30,000. ABC Company's contribution margin and operating income are __________ and __________ respectively.

a. $50,000; $20,000

b. $20,000; $70,000

c. $70,000; $50,000

d. $70,000; $20,000

3. Managerial accounting, as compared to financial accounting:

a. must conform to GAAP.

b. places a great deal of emphasis on historical transactions.

c. uses frequent and prompt control reports.

d. focuses on information prepared for the investors and creditors.

4.The value chain of an organization refers to:

a. the process of using strategic cost information to manage the activities of the organization.

b. the sequence of functions and related activities that add value for the customer.

c. the procedure of collecting and recording the value of information in the accounting system

d.none of the answers are correct.

Answer 1

1). Answer is d). fixed costs per unit change.
When volume changes, only fixed costs will remain same and hence per unit fixed costs changes.

2). Answer is d). $70,000; $20,000

Sales = $100,000
Less: Variable costs = $30,000
Contribution margin = $70,000
Less: Fixed costs = $50,000
Operating Income = $20,000

3). Answer is c). uses frequent and prompt control reports.

4). Answer is b). the sequence of functions and related activities that add value for the customer.
Value chain includes the activities undertaken by the organisation to create value for its customers