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Exam 11: Cost Behavior and Cost-Volume-Profit Analysis

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Question 1

True/False

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Only a single line,which represents the difference between total sales revenues and total costs,is plotted on the cost-volume-profit chart.

A) True
B) False

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Question 2

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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.Such an analysis is called

A) "what if" or sensitivity analysis.
B) vary the data analysis.
C) computer-aided analysis.
D) data gathering.

E) A) and B)
F) None of the above

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Question 3

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

If sales are $820,000,variable costs are 68% of sales,and operating income is $260,000,what is the contribution margin ratio?

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

Even if a business sells six products,it is possible to estimate the break-even point.

If fixed costs are $450,000 and the unit contribution margin is $50,the sales necessary to earn an operating income of $30,000 are 14,000 units.

A production supervisor's salary that does NOT vary with the number of units produced is an example of a fixed cost.

Direct materials and direct labor costs are examples of variable costs of production.

Foggy Co.has the following operating data for its manufacturing operations: 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 break-even point for Flynn Co.will

The data required for determining the break-even point for a business are the total estimated fixed costs for a period stated as a percentage of net sales.

If sales are $200,000,variable costs are 56% of sales,and operating income is $30,000,what is the contribution margin ratio?

For purposes of analysis,mixed costs can generally be separated into their variable and fixed components.

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

If the volume of sales is $6,000,000 and sales at the break-even point amount to $4,800,000,the margin of safety is 20%.

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

For the coming year,Belton Company estimates fixed costs at $60,000,the unit variable cost at $25,and the unit selling price at $50.Determine (a)the break-even point in units of sales, (b)the unit sales required to realize operating income of $100,000,and (c)the probable operating income if sales total $400,000.

Total fixed costs remain constant as the level of activity changes.

The difference between the current sales revenue and the sales at the break-even point is called the

A low operating leverage is normal for highly automated industries.