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

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Question 41

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If fixed costs are $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?

A) 7,500 units and 6,667 units
B) 20,000 units and 30,000 units
C) 20,000 units and 15,000 units
D) 12,000 units and 15,000 units

E) All of the above
F) B) and C)

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Question 42

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Given the following cost data, what type of cost is shown?

A) mixed cost
B) variable cost
C) fixed cost
D) none of the above

E) C) and D)
F) All of the above

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Question 43

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Contribution margin is:

The contribution margin ratio is:

The Tom Company reports the following data. Determine Tom Company's operating leverage.

Match the following terms with their definitions.

Which of the following statements is true regarding fixed and variable costs?

A rental cost of $20,000 plus $.70 per machine hour of use is an example of a mixed cost.

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 product X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y.

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

The range of activity over which changes in cost are of interest to management is called the relevant range.

Cost-volume-profit analysis cannot be used if which of the following occurs?

Copper Hill Inc. manufactures laser printers within a relevant range of production of 70,000 to 100,000 printers per year. The following partially completed manufacturing cost schedule has been prepared: Complete the preceding cost schedule, identifying each cost by the appropriate letter (a) through (o).

If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point in sales dollars?

Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low method of cost estimation, total fixed costs are:

Which of the following costs is a mixed cost?

Explain how variable costing net income will be different than absorption costing net income under the following situations: (1) A company had no beginning or ending inventory. During the year they produced and sold 10,000 units. (2) A company had no beginning inventory. During the year they produced 10,000 units and sold 8,000 units. (3) A company had 2,000 units in beginning inventory. During the year they produced 10,000 units and sold 12,000 units.

The manufacturing cost of Mocha Industries for three months of the year are provided below: Using the high-low method, determine the (a) variable cost per unit, and (b) the total fixed costs.

Which of the following describes the behavior of the variable cost per unit?

Absorption costing is required for financial reporting under generally accepted accounting principles.