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Exam 11: Cost-Volume-Profit Analysis

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Question 1

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Variable costs as a percentage of sales for Protoveo Inc.are 65%, sales are $500,000, and fixed costs are $125,000.How much would operating income change if sales decrease by $10,000?

A) $3,500 increase
B) $3,500 decrease
C) $3,250 decrease
D) $3,500 increase.

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

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Question 2

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Knowing how costs behave to change in the level of activity is useful to management for all the following reasons except for:

A) predicting customer demand.
B) predicting profits as sales and production volumes change.
C) estimating costs.
D) changing an existing product production.

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

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Question 3

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Direct materials cost is an example of a fixed cost of production.

If fixed costs are $220,000 and the unit contribution margin is $25, the sales necessary to earn an operating income of $30,000 are 10,000 units.

For purpose of analysis, mixed costs can generally be separated into their variable and fixed components.

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

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

Direct materials and direct labor costs are examples of variable costs of production.

Under direct costing, only _____ manufacturing costs are included in the product cost.

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: ?? $\begin{array}{cccc} & \text { Unit } & \text { Unit } & \text { Unit } \\& \text { Selling Variable } & \text { Contribution } \\\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \\\hline\text { Arks } & \$ 80 & \$ 20 & \$ 60 \\\text { Bins } & 120 & 40 & 80\end{array}$ ? What was Kennedy's overall product's unit contribution margin?

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

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.Such an analysis is called:

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

Based on the following information, calculate fixed costs per month using the high-low method. ? $\begin{array} { l c c } & \text { Cost } & \text { Machine Hours } \\\text { May } & \$ 56,000 & 22,000 \\\text { June } & 76,000 & 32,000 \\\text { July } & 58,000 & 26,000 \\\text { August } & 66,000 & 24,000\end{array}$

Compute the break-even point (in dollars) if fixed costs are $540,000 and variable cost are 70% of sales.

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

Costs that remain constant on a per-unit level as the level of activity changes are called:

If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

Which of the following is true about the changes in fixed cost?

Which of the following graphs illustrates the behavior of a total variable cost? ​ ​