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

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Question 81

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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.

A) True
B) False

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Question 82

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If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sale units) if fixed costs are reduced by $30,000?

A) 30,000 units
B) 8,710 units
C) 12,273 units
D) 20,000 units

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

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Question 83

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

Given the following cost data, what type of cost is shown? $\begin{array} { | l | l | } \hline { \text { Total Cost } } & \text { Number of units } \\\hline \$ 20 & 1 \\\hline \$ 40 & 2 \\\hline \$ 60 & 3 \\\hline \$ 80 & 4 \\\hline\end{array}$

Direct materials cost that varies with the number of units produced is an example of a fixed cost of production.

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

The point in operations at which revenues and expenses are exactly equal is called the break-even point.

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

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

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

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 relevant range is useful for analyzing cost behavior for management decision-making purposes.

Johnson's Plumbing's fixed costs are $700,000 and the unit contribution margin is $17. What amount of units must be sold in order to realize an operating income of $100,000?

The Waterfall Company sells a product for $150 per unit. The variable cost is $80 per unit, and fixed costs are $270,000. Determine the a) break-even point in sales units, and b) break-even points in sales units if the company desires a target profit of $36,000. Round your answer to the nearest whole number.

Harley Company has sales of $500,000, variable costs are 75% of sales, and operating income is $40,000. What is Harley's operating leverage?

Connor Company's fixed costs are $400,000, the unit selling price is $25, and the unit variable costs are $15. What is the break-even sale units) if the variable costs are increased by $2?

Assuming that last year's fixed costs totaled $960,000, what was Carter Co.'s break-even point in units?

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

The manufacturing cost of Carrie Industries for the first 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 cost.

Given the following cost and activity observations for George Company's utilities, use the high­low method to calculate George's variable utilities costs per machine hour. $\begin{array} { | l | l | r | } \hline & \text { Cost } & \text { Machine Hours } \\\hline \text { May } &\$16,500 & 105,000 \\\hline \text { June } & 18,000 & 120,000 \\\hline \text { July } & 16,000 & 100,000 \\\hline \text { August } & 17,500 & 117,000 \\\hline\end{array}$