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Exam 19: Cost Behavior and Cost-Volume-Profit Analysis

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Question 111

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Bluegill Company sells 45,000 units at $18 per unit. Fixed costs are $62,000 and income from operations is $298,000. Determine the a) variable cost per unit, b) unit contribution margin, and c) contribution margin ratio.

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Question 112

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Which of the following costs is a mixed cost?

A) salary of a factory supervisor
B) electricity costs of $3 per kilowatt-hour
C) rental costs of $10,000 per month plus $0.30 per machine hour of use
D) straight-line depreciation on factory equipment

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

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Question 113

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Variable costs are costs that vary on a per-unit basis with changes in the activity level.

Figure 21-1 -Which of the following activity bases would be the most appropriate for food costs of a hospital?

Match the following terms with their definitions. -A specific activity range over which the cost changes are of interest.

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: a) Sales commissions of $6,000 plus $0.05 for each item sold. b) Rent on warehouse of $12,000 per month. c) Insurance costs of $2,500 per month. d) Per-unit cost of direct labor. e) Total salaries of quality control supervisors. One supervisor must be added for each additional work shift. f) Total employer pension costs of $0.35 per direct labor hour. g) Per-unit straight-line depreciation costs. h) Per-unit cost of direct materials. i) Total direct materials cost. j) Electricity costs of $5,000 per month plus $0.0004 per kilowatt-hour. k) Per-unit cost of plant superintendent's salary. l) Salary of the night-time security guard of $3,800 per month. m) Repairs and maintenance costs of $3,000 for each 2,000 hours of factory machine usage. n) Total direct labor cost. o) Straight-line depreciation on factory equipment.

A business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed costs of $240,000, a break- even point of $960,000, and operating income of $60,000 for the current year. Calculate the current year's sales.

If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease.

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: $\begin{array} { l l l l } & \text { Unit Selling } & \text { Unit Variable } & \text { Unit Contribution } \\\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \\\hline \text { Arks } & \$ 120 & \$ 80 & \$ 40 \\\text { Bins } & 80 & 60 & 20\end{array}$ -What was Carter Co.'s unit selling price of E, with E representing one overall "enterprise" product?

The Dean Company has sales of $500,000, and the break-even point in sales dollars of $300,000. Determine the company's margin of safety percentage.

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

Assuming no other changes, operating income will be the same under both the variable and absorption costing methods when the number of units manufactured equals the number of units sold.

If sales are $820,000, variable costs are 55% of sales, and operating income is $260,000, what is the contribution margin ratio?

A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of $1,000,000. a) What is the break-even point in sales dollars? b) What is the operating income? c) If neither the relationship between variable costs and sales nor the amount of fixed costs is expected to change in the next year, how much additional operating income can be earned by increasing sales by $110,000?

Given the following cost and activity observations for Bounty Company's utilities, use the high­low method to calculate Bounty' variable utilities costs per machine hour. Round your answer to the nearest cent.

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: $\begin{array} { l l l l } & \text { Unit Selling Price } & \text { Unit Variable } & \text { Unit Contribution } \\\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \\\hline \mathrm { X } & \$ 110.00 & \$ 70.00 & \$ 40.00 \\\mathrm { Y } & 70.00 & 50.00 & 20.00\end{array}$ -What was Rusty Co.'s weighted average unit selling price?

A cost that has characteristics of both a variable cost and a fixed cost is called a

The dollars available from each unit of sales to cover fixed cost and profit is the unit variable cost.

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

What would Timmer's net income be for the year using absorption costing?