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Exam 11: Cost-Volume-Profit Analysis

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Question 41

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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: $\begin{array}{cccc} & \text { Unit } & \text { Unit } & \text { Unit } \\& \text { Selling Variable } & \text { Contribution } \\\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \\\hline\text { Arks } & \$ 80 & \$ 20 & \$ 60 \\\text { Bins } & 120 & 40 & 80\end{array}$ ? Assuming that last year's fixed costs totaled $910,000, what was Kennedy's break-even point in units?

A) 9,100 units
B) 13,000 units
C) 13,227 units
D) 13,542 units

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

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Question 42

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If direct materials cost per unit increases, the break-even point will increase.

A) True
B) False

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Question 43

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Rental charges of $60,000 per year plus $2 for each machine hour over 15,000 hours is an example of a fixed cost.

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

If the volume of sales is $6,000,000 and sales at the break-even point amount to $5,000,000, the margin of safety will be 20%.

Calculate operating leverage if sales are $342,000, variable costs are 58% of sales, and operating income is $42,000.

Using the high-low method, calculate variable utilities costs per machine hour. ? $\begin{array} { l c c } & \text { Cost } & \text { Machine Hours } \\\text { January } & \$ 8,200 & 14,900 \\\text { February } & 13,600 & 21,200 \\\text { March } & 5,600 & 5,200 \\\text { April } & 9,400 & 17,900\end{array}$ ?

Fixed costs are costs that vary in total dollar amount as the level of activity changes.

If fixed costs are $450,000 and the unit contribution margin is $50, the sales necessary to earn an operating income of $30,000 are 14,000 units.

Which of the following is an example of a cost that varies in proportion to changes in the activity base?

The systematic examination of the relationships among selling prices, volume of sales and production, costs, expenses, and profits is termed as:

Compute break-even sales (in units) when fixed costs are $420,000, unit selling price is $66, and unit variable cost is $42.

Vest Food Co.has the following operating data: $\begin{array}{lr}\text { Unit selling price } & \$ 10.00 \\\text { Unit variable cost } & 6.00 \\\text { Fixed costs } & 960,000\end{array}$ ? The company is contemplating moving to another state where direct labor costs can be reduced, thereby reducing the unit variable cost by 10%.The state where the company currently operates has offered to reduce property taxes to encourage Vest to stay.The minimum amount of property tax savings necessary to keep the company, assuming no other changes, would be:

The fixed cost per unit varies with changes in the level of activity.

Currently, fixed costs are $561,000 and the unit contribution margin is $10.What would be the break-even point in units if variable cost is decreased by $0.50 per unit?

The graph of a variable cost per unit when plotted against its related activity base appears as a:

Variable costs are costs that remain constant in total with changes in the activity level.

Which of the following graphs illustrates the nature of a mixed cost? ​ ​ ​

A business has a capacity of $4,000,000 of sales, actual sales of $1,500,000, break-even sales of $900,000, fixed costs of $540,000, and variable costs that are 40% of sales.What is the margin of safety expressed as a percentage of sales?

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed: