Understanding Funding and Finance LO2 Quiz

Which of the following is considered a direct cost in a business?

• Insurance

• Labour for production

• Rent

• Advertising

What type of expense is fuel considered for a delivery company?

• Overhead

• Consumable

• Fixed cost

• Variable cost

Which of the following best describes rent in business accounting?

• Direct cost

• Indirect cost

• Variable cost

• Consumable

Consumables in a production environment are typically categorized as:

• Fixed costs

• Variable costs

• Indirect costs

• Overheads

Mortgage payments for business property are usually considered as:

• Consumables

• Direct costs

• Fixed costs

• Variable costs

The formula for calculating the margin of safety is:

• Total sales - Variable costs

• Current sales - Break-even sales

• Break-even sales ÷ Total sales

• Fixed costs ÷ Contribution margin

A company's sales volume is below its break-even point. This indicates:

• The company is making a profit.

• The company is at the margin of safety.

• The company is operating at a loss.

• The company has no fixed costs.

Costs that remain constant regardless of production volume are called:

• Variable costs

• Marginal costs

• Fixed costs

• Direct costs

If unit sales double over a given period, which of the following is likely to increase?

• Fixed costs

• Variable costs

• Rent expense

• Mortgage payments

The break-even point is where:

• Total revenue equals total fixed costs.

• Total costs equal total revenue.

• Variable costs equal fixed costs.

• Contribution margin equals net income.