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Exam 21: Cost-Volume-Profit Analysis

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Question 31

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Variable costs are costs that remain constant on a per-unit basis as the level of activity changes.

A) True
B) False

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Question 32

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For the past year, Iris Company had fixed costs of $6,708,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs, except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (units) for (a) the past year and (b) the coming year.

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(a)$6,708,000/$156 =...

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Question 33

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The following is a list of various costs of producing T-shirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold. (a)Ink used for screen printing (b)Warehouse rent of $8,000 per month plus $0.50 per square foot of storage used (c)Thread (d)Electricity costs of $0.038 per kilowatt-hour (e)Janitorial costs of $4,000 per month (f)Advertising costs of $12,000 per month (g)Accounting salaries (h)Color dyes for producing different colors of T-shirts (i)Salary of the production supervisor (j)Straight-line depreciation on sewing machines (k)Salaries of internal pattern designers (l)Hourly wages of sewing machine operators (m)Property taxes on factory, building, and equipment (n)Cotton and polyester cloth (o)Maintenance costs with sewing machine company (The cost is $2,000 per year plus $0.001 for each machine hour of use.)

-Which of the graphs in Figure 21-1 illustrates the nature of a mixed cost?

O'Boyle Co.'s fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20. What is the break-even sales (units) ?

-Which of the graphs in Figure 21-1 illustrates the behavior of a total fixed cost?

Jacob Inc. has fixed costs of $240,000, the unit selling price is $32, and the unit variable costs are $20. What are the old and new break-even sales (units) if the unit selling price increases by $4?

Which of the following conditions would cause the break-even point to decrease?

Charlotte Co. has budgeted salary increases to factory supervisors totaling 9%. If selling prices and all other cost relationships are held constant, next year's break-even point

Flying Cloud Co. has the following operating data for its manufacturing operations:Unit selling price$ 250Unit variable cost100Total fixed costs840,000​The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the next break-even point for Flying Cloud Co. will be

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.? The sales mix for products X and Y is 60% and 40%, respectively. Determine the break-even point in units of X and Y. If required, round answer to nearest whole number.

If a business sells four products, it is not possible to estimate the break-even point.

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would

Consider the following information:?Variable cost per unit = $5July fixed cost per unit = $7Units sold and produced in July = 28,000?What is the total estimated cost for August if 30,000 units are projected to be produced and sold?

Which of the following conditions would cause the break-even point to increase?

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. This is called

The adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

If yearly insurance premiums are increased, this change in fixed costs will result in an increase in the break-even point.

Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and loss from operations is $ (50,000). Determine the (a) unit contribution margin (b) contribution margin ratio, and (c) fixed costs per unit at production of 25,000 units. If required, round to two decimal places.