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Exam 20: Cost-Volume-Profit Analysis

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Question 101

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Match each of the following costs with the graph (a-e) that best portrays its cost behavior as the number of units produced and sold increases. -Total direct materials cost A)Graph 1 B)Graph 2 C)Graph 3 D)Graph 4 E)Graph 5

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Question 102

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

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Question 103

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If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs?

The three most common cost behavior classifications are

In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity.

The point where the profit line intersects the horizontal axis on the profit-volume chart represents the

Match each of the following descriptions with the appropriate term (a-e). -Remain(s) the same in total dollar amount as the level of activity changes A)Relevant range B)Break-even point C)Contribution margin D)Fixed costs E)Variable costs

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

Match each of the following descriptions with the appropriate term (a-e). -Indicates the possible decrease in sales that may occur before operating loss results A)Profit-volume chart B)Cost-volume-profit chart C)Sales mix D)Operating leverage E)Margin of safety

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

Break-even analysis is one type of cost-volume-profit analysis.

Which of the following types of cost is shown in the cost data below?

Match each of the following costs of producing T-shirts with the appropriate classification (a-c). -Hourly wages of sewing machine operators A)Variable cost B)Fixed cost C)Mixed cost

The contribution margin ratio is the same as the profit-volume ratio.

Cordell, Inc., has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the profit-volume chart.

Match each of the following descriptions with the appropriate term (a-e). -The point at which a business's revenues exactly equal costs A)Relevant range B)Break-even point C)Contribution margin D)Fixed costs E)Variable costs

If fixed costs are $600,000 and the unit contribution margin is $40, the break-even point if fixed costs are increased by $90,000 is

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