Operating income statement *,”1) contribution margin per unit X average sales volume units= contribution marginLESS: fixed expenses= operating income* average sales volume units = use the “”most locations WERE selling2) new contribution margin per unit (‘lower sales price per bowl’ – ‘variable costs would be’)X new sales volume units (‘each restaurants volume to increase 8

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“3. Data for Cost A and Cost B are as follows: Number of Units Produced Unit Cost Total Cost Cost A 1 ? $ 10 10 ? 100 100 ? 1000 1,000 ? 10000 Cost B 1 5000 ? 10 500 ? 100 50 ? 1,000 5 ? Which of the above best describes the behavior of Costs A and B? a. Cost A is fixed, Cost B is variable. b. Cost A is variable, Cost B is fixed. c. Both Cost A and Cost B are variable. d. Both Cost A and Cost B are fixed.”

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4. Straight-line depreciation on a computer used in the marketing department of a manufacturing firm would be classified as a. a product cost that is fixed in terms of cost behavior. b. a period cost that is fixed in terms of cost behavior. c. an asset representing funds accumulated to replace the computer when it is retired. d. a liability representing the probably future outlay of funds to replace the computer when it is retired.

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5. Cobra Mining Company spent $200 million five years ago to develop underground mining and milling operations in a remote area of a western state. Metals prices have since declined precipitously and the company is considering abandoning the operation. The term that would best describe the $200 million expenditure as regards the abandonment decision is a. sunk cost. b. noncontrollable cost. c. differential cost. d. opportunity cost.

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