(A) It is a useful long-term planning technique.
(B) It assumes that fixed costs remain fixed over relevant activity ranges.
(C) It assumes that other costs vary in proportion to activity.
(D) It assumes that costs can be classified as variable or fixed.
Tag: Financial Accounting Mcqs
When a business is faced with a limiting factor (one which limits the activity of an entity) and there is a choice to be made between options to follow, which of the following statements describes the optimal course of action?
(A) Choose the option which gives the highest unit profit.
(B) Choose the option which gives the highest unit contribution.
(C) Aim to achieve a balance of activities covering all of the options.
(D) Choose the option which gives highest contribution per unit of limiting factor.
The break-even point is that at which:
(A) The level of activity at which the business operates most economically.
(B) The level of activity at which the business makes neither a profit nor a loss.
(C) The fixed costs are lowest.
(D) The variable cost per unit is minimized.
The term ‗contribution‘ refers to?
(A) The actual amount of profit made per unit.
(B) The budgeted profit per unit.
(C) The amount of profit which goes towards meeting the overheads of the business.
(D) The difference between sales revenue and variable costs per unit.
A variable cost is?
(A) One which varies in proportion to the level of fixed cost incurred.
(B) One which tends to vary with the level of activity.
(C) One which changes over time.
(D) One which cannot be estimated with any great degree of accuracy.
If there has been an over recovery of overheads, at the end of the accounting period the amount concerned should be?
(A) Debited to the company profit and loss account.
(B) Credited to the company profit and loss account.
(C) Carried forward to the next accounting period as a cost saving.
(D) Used to reduce next period‘s overhead recovery rate.
If a company uses predetermined overhead recovery rates and at the end of a period finds that there has been an under-recovery of overhead, which of the following best explains how the under-recovery has occurred?
(A) Actual overhead cost has exceeded the amount used as a basis for the establishment of the predetermined rate.
(B) Actual overhead cost has been less than the amount used as a basis for the establishment of the predetermined rate.
(C) Actual activity levels were higher than planned due to an increase in demand.
(D) An expected price increase in the overhead costs which was built into the overhead recovery rate did not take place.
Sales commissions are classified as?
(A) Prime costs
(B) Period costs
(C) Product costs
(D) Indirect labour