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Exam 21: Cost Behavior and Cost-Volume-Profit Analysis

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Question 1

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If sales are $914,000, variable costs are $498,130, and operating income is $260,000, what is the contribution margin ratio?

A) 52.2%
B) 28.4%
C) 54.5%
D) 45.5%

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

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Question 2

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

A) True
B) False

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Question 3

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

The Rocky Company reports the following data. Rocky Company's operating leverage is:

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

Trail Bikes, Inc. sells three Deluxe bikes for every seven Standard bikes. The Deluxe bike sells for $1,800 and has variable costs of $1,200. The Standard bike sells for $600 and has variable costs of $200. Required: A. If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in order for the company to break even? B. How many of these bikes will be Deluxe bikes and how many will be the Standard bikes?

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.

The point where the profit line intersects the horizontal axis on the profit-volume chart represents:

In cost-volume-profit analysis, all costs are classified into the following two categories:

In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity.

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:

Break-even analysis is one type of cost-volume-profit analysis.

Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are: What was Carter Co.'s weighted average unit contribution margin?

If sales are $820,000, variable costs are 45% of sales, and operating income is $260,000, what is the contribution margin ratio?

If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24, what is the break-even sales (units) ?

Perfect Stampers makes and sells aftermarket hub caps. The variable cost for each hub cap is $4.75 and the hub cap sells for $9.95. Perfect Stampers has fixed costs per month of $3,120. Compute the contribution margin per unit and break-even sales in units and in dollars for the month.

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

The cost graphs in the illustration below shows various types of cost behaviors. For each of the following costs, identify the cost graph that best describes its cost behavior as the number of units produced and sold increases:

If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.