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

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Question 81

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The manufacturing cost of Carrie Industries for the first three months of the year are provided below:

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Using the high-low method, det...

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Question 82

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Variable costs as a percentage of sales are equal to 100% minus the contribution margin ratio.

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Question 83

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Marcye Co. manufactures office furniture. During the most productive month of the year, 3,500 desks were manufactured at a total cost of $84,400. In its slowest month, the company made 1,100 desks at a cost of $46,000. Using the high-low method of cost estimation, total fixed costs are:

In cost-volume-profit analysis, all costs are classified into the following two categories:

If fixed costs are $500,000 and the unit contribution margin is $20, what is the break-even point in units if fixed costs are reduced by $80,000?

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

Blane Company has the following data: What will operating income be if units sold double to 100,000 units?

A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

The cost graphs in the illustration below shows various types of cost behaviors.

The Atlantic Company sells a product with a break-even point of 3,000 sales units. The variable cost is $60 per unit, and fixed costs are $270,000. Determine the (a) unit sales price, and (b) break-even points in sales units if the company desires a target profit of $36,000.

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

Knowing how costs behave is useful to management for all the following reasons except for

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 weighted average unit selling price?

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

Cost behavior refers to the manner in which a cost changes as the related activity changes.

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

Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45 and total fixed costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000, but decrease the variable costs per unit to $42. Required: If Louis Company expects to sell 44,000 units next year, should they purchase this new equipment?

If sales are $400,000, variable costs are 75% of sales, and operating income is $50,000, what is the operating leverage?

For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32, and a unit selling price of $40. For the coming year, no changes are expected in revenues and costs, except that property taxes are expected to increase by $10,000. Determine the break-even sales (units) for (a) the past year and (b) the coming year.

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