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Exam 5: Cost Volume Profit Analysis

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Question 111

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

A) True
B) False

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Question 112

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Safari Co. sells two products, Orks and Zins. Last year, Safari sold 21,000 units of Orks and 14,000 units of Zins. Related data are Calculate the following: a.  Safari Co.'s sales mix b.  Safari Co.'s unit selling price of E? c.  Safari Co.'s unit contribution margin of E? d.  Safari Co.'s break-even point assuming that last year's fixed costs were $160,000.

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a.  Orks: 21,000/(21,000 + 14,000) = 60%...

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Question 113

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Contribution margin is

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?

Carrolton, Inc. currently sells widgets for $80 per unit.  The variable cost is $30 per unit and total fixed costs equal $240,000 per year.  Sales are currently 20,000 units annually. The company is considering a 20% drop in selling price that it believes will raise units sold by 20%.   Assuming all costs stay the same, what is the impact on income if this change is made?

Variable costs are costs that remain constant in total dollar amount as the level of activity changes.

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

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

A low operating leverage is normal for highly automated industries.

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