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

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Question 61

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Companies with large amounts of fixed costs will generally have a high operating leverage.

A) True
B) False

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Question 62

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Variable costs are costs that vary in total in direct proportion to changes in the activity level.

A) True
B) False

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Question 63

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Silver River Company sells Products S and T and has made the following estimates for the coming year: Fixed costs are estimated at $202,400. Determine (a) the estimated sales in units of the overall product necessary to reach the break-even point for the coming year, (b) the estimated number of units of each product necessary to be sold to reach the break-even point for the coming year, and (c) the estimated sales in units of the overall product necessary to realize an operating income of $119,600 for the coming 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 Grant Company has sales of $300,000, and the break-even point in sales dollars if $225,000. Determine the company's margin of safety percentage.

If fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are $73, what is the break-even sales (units) ?

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

Match the following terms with their definitions.

(a) If Swannanoa Company's budgeted sales are $1,000,000, fixed costs are $350,000, and variable costs are $600,000, whatis the budgeted contribution margin ratio? (b) If the contribution margin ratio is 30%, sales are $900,000 and fixed costs are $200,000, what is the operating profit?

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.

Cost-volume-profit analysis can be presented in both equation form and graphic form.

Most operating decisions of management focus on a narrow range of activity called the:

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed:

If a business had sales of $4,000,000 and a margin of safety of 25%, the break-even point was:

Calzone Co. has budgeted salary increases to factory supervisors totaling 8%. If selling prices and all other cost relationships are held constant, next year's break-even point:

The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed:

Which of the following describes the behavior of the fixed cost per unit?

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 they believe will raise units sold by 20%. Assuming all costs stay the same, what is the impact on income if they make this change?

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?

The relative distribution of sales among the various products sold by a business is termed the: