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Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

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Question 111

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If fixed costs are $350,000, the unit selling price is $29, and the unit variable costs are $20, what is the break-even sales (units) if the variable costs are decreased by $4?

A) 26,924 units
B) 12,069 units
C) 21,875 units
D) 38,889 units

E) B) and D)
F) All of the above

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Question 112

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

A) True
B) False

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Question 113

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Costs that remain constant in total dollar amount as the level of activity changes are called:

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: What was Carter Co.'s sales mix last year?

Racer Industries has fixed costs of $900,000. Selling price per unit is $250 and variable cost per unit is $130. Required: a. How many units must Racer sell in order to break even? b. How many units must Racer sell in order to earn a profit of $480,000? c. A new employee suggests that Racer Industries sponsor a company 10-K as a form of advertising. The cost to sponsor the event is $7,200. How many more units must be sold to cover this cost?

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents:

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.

For the current year ending January 31, Harp Company expects fixed costs of $188,500 and a unit variable cost of $51.50. For the coming year, a new wage contract will increase the unit variable cost to $55.50. The selling price of $70.00 per unit is expected to remain the same.

Which of the following costs is a mixed cost?

Garmo Co. has an operating leverage of 5. Next year's sales are expected to increase by 10%. The company's operating income will increase by 50%.

The contribution margin ratio is:

If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

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

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs, $108,000. A proposal is being evaluated to increase the selling price to $54.

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

If fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?