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Multiple choice questions on Marginal costing.

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1. Which costs will change with an increase in activity within the relevant range?

  1. Unit fixed cost and total fixed cost
  2. Unit variable cost and total variable cost
  3. Unit fixed cost and total variable cost
  4. Unit fixed cost and unit variable cost

2. Salaries of accounts receivable clerks when one clerical worker is needed for every 750 accounts receivable is an example of a:

  1. step-variable cost
  2. mixed cost
  3. curvilinear cost
  4. fixed cost

3. With respect to a fixed cost, an increase in the activity level within the relevant range results in:

  1. an increase in fixed cost per unit.
  2. a decrease in fixed cost per unit.
  3. an unchanged fixed cost per unit.
  4. a proportionate increase in total fixed costs

4. In the standard cost formula Y = a + bX, what does the "Y" represent?

  1. total cost
  2. total variable cost
  3. variable cost per unit
  4. total fixed cost

5. In the standard cost formula Y = a + bX, what does the "a" represent?

  1. variable cost per unit
  2. total cost
  3. total variable cost
  4. total fixed cost

6. Contribution margin is computed as sales revenue minus:

  1. variable expenses
  2. cost of goods manufactured
  3. cost of goods sold
  4. fixed expenses

7. Which of the following approaches to preparing an income statement calculates gross margin?

  1. Item A
  2. Item B
  3. Item C
  4. Item D

8. The least-squares regression method:

  1. is generally less accurate than the scattergraph method.
  2. can be used only if the fixed cost element is larger than the variable cost element.
  3. is the only method acceptable under generally accepted accounting principles.
  4. fits a regression line by minimizing the sum of the squared errors from the regression line.

9. A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that:

  1. The cost per unit of A has decreased.
  2. The cost per unit of B has remained unchanged.
  3. The cost per unit of A has remained unchanged.
  4. The cost per unit of B has decreased.

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