Mini-Mid Exam 3 Review

True or False: The unit contribution margin is the amount that each unit sold contributes to the recovery of fixed costs and profit.

• True

• False

True or False: It is always better to retain old equipment if it is not fully depreciated.

• True

• False

The high-low method is a more accurate way to determine variable and fixed costs, compared to the regression method.

• True

• False

Leah owns a major airline (Leah Likes to Fly) (LLF) and they use the length of flights to identify how costs change. Length of flights is the ___ for LLF?

• Cost Behavior Analysis

• Activity Index

• Activity Changes

• Volume Changes

Companies can be compared based on what metric that measures a companies potential for volatile earnings?

• Degree of sales leverage

• Degree of revenue leverage

• Degree of financing leverage

• Degree of operating leverage

Company A incurs $5,600 in costs at a production level of 280 units year 1. In year 2, Company A incurs $2,400 in costs at a production level of 120 hours. What type of cost is this?

• Variable

• Fixed

• Mixed

True or False: Fixed costs remain constant in total and decrease per unit as the activity level increases.

• True

• False

When applying the high-low method, the total fixed cost portion of a mixed cost is calculated before the variable cost component.

• True

• False

In incremental analysis, both total variable costs and total fixed costs could change under alternative courses of action.

• True

• False

While managers are the ones who make decisions, accountants contribute to the decision making process by creating and providing reports to the managers.

• True

• False