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

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Question 21

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Cost behavior refers to the manner in which a cost changes as the related activity changes.

A) True
B) False

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Question 22

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As production increases,what should happen to the variable costs per unit?

A) Stay the same
B) Increase
C) Decrease
D) Either increase or decrease,depending on the fixed costs

E) B) and D)
F) A) and C)

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Question 23

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Wiles Inc.'s unit selling price is $40,the unit variable costs are $30,fixed costs are $135,000,and current sales are 10,000 units.How much will operating income change if sales increase by 5,000 units?

Tops Company sells Products D and E and has made the following estimates for the coming year: Fixed costs are estimated at $202,400.Determine (a)the estimated sales in units of the overall product necessary to reach the break-even point for the coming year, (b)the estimated number of units of each product necessary to be sold to reach the break-even point for the coming year,and (c)the estimated sales in units of the overall product necessary to realize an operating income of $119,600 for the coming year.

If fixed costs are $561,000 and the unit contribution margin is $10,what is the break-even point in units if variable costs are decreased by $0.50 per unit?

Kennedy Co.sells two products,Arks and Bins.Last year,Kennedy sold 32,000 units of Arks and 18,000 units of Bins.Related data are: -What was Kennedy Co.'s overall enterprise product's unit variable cost?

Which of the following activity bases would be the most appropriate for gasoline costs of A delivery service such as UPS?

Knowing how costs behave is useful to management for all the following reasons EXCEPT for

When a business sells more than one product at varying selling prices,the business's break-even point can be determined as long as the number of products does not exceed

Which of the following is an example of a cost that varies in total as the number of units produced changes?

If sales total $2,000,000,fixed costs total $800,000,and variable costs are 60% of sales,the contribution margin ratio is 40%.

Variable costs are costs that remain constant in total with changes in the activity level.

A company has a margin of safety of 25%,a contribution margin ratio 30%,and sales of $1,000,000.

Because variable costs are assumed to change in constant proportion with changes in the activity level,the graph of the variable costs when plotted against the activity level appears as a circle.

For the past year,Cline Company had fixed costs of $6,552,000,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 (in units)for (a)the past year and (b)the coming year.

If the volume of sales is $4,000,000 and sales at the break-even point amount to $3,200,000,the margin of safety is 20%.

If fixed costs are $850,000 and the unit contribution margin is $90,what amount of units must be sold in order to have a zero profit?

Cost behavior refers to the manner in which

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.

If the unit selling price is $40,the volume of sales is $3,000,000,sales at the break-even point amount to $2,500,000,and the maximum possible sales are $3,300,000,the margin of safety is 12,500 units.