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Exam 21: Cost Behavior and Cost-Volume-Profit Analysis

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Question 101

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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.

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Question 102

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Given the following cost and activity observations for Taco Company's utilities, use the high-low method to calculate Taco's variable utilities costs per machine hour.

A) $10.00
B) $.60
C) $.40
D) $.52

E) B) and D)
F) A) and D)

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Question 103

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The data required for determining the break-even point for a business are the total estimated fixed costs for a period, stated as a percentage of net sales.

Harold Corporation just started business in January 2012. They had no beginning inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000 units. The selling price of each unit was $20. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $2 per unit. Fixed manufacturing costs were $24,000 and fixed selling and administrative costs were $6,000. What would be the Harold Corporations Net income for 2012 using variable costing?

Cost behavior refers to the manner in which:

For the current year ending April 30, Hal Company expects fixed costs of $60,000, a unit variable cost of $70, and anticipated break-even of 1,715 sales units. Round your answer to the nearest whole number.

If the contribution margin ratio for France Company is 45%, sales were $425,000. and fixed costs were $100,000, what was the income from operations?

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?

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

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

If fixed costs are $500,000 and variable costs are 60% of break-even sales, profit is zero when sales revenue is $930,000.

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?

Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while fixed costs are $75,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $100 per unit.

A mixed cost has characteristics of both a variable and a fixed cost.

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:

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?

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 14,500 units.

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 adoption of variable costing for managerial decision making is based on the premise that fixed factory overhead costs are related to productive capacity of the manufacturing plant and are normally not affected by the number of units produced.

Which of the graphs in Figure 20-1 illustrates the nature of a mixed cost?