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Exam 6: Cost-Volume-Profit Relationships

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Question 71

Multiple Choice

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Which of the following equations describes the contribution margin ratio?

A) 1 - (Variable Costs / Sales)
B) (Variable Costs - 1 / Sales
C) (Sales - 1) / Variable Costs
D) Sales × (1 - Variable Costs) / Variable Costs
E) None of the above

F) B) and C)
G) None of the above

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Question 72

Multiple Choice

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Milkon Manufacturing produces sensors used in microchip manufacturing processes. Milton has a regular supplier, who provides a key component of the sensors to meet Milton's regular manufacturing demands. However, when Milton has special orders come in that necessitate production beyond a normal range of activity, the supplier does not have the capacity to meet Milton's extra demand for components. In that case, Milton will purchase the components from other suppliers. However, because the preferred supplier gives Milton a volume discount, the per-unit cost of the extra components is greater than the usual price Milton pays for the components. How would the overall materials cost of the components be properly classified?

A) Fixed
B) Variable
C) Mixed
D) Stepped
E) Curvilinear

F) All of the above
G) A) and D)

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Question 73

Essay

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Legend Inc., a jewelry manufacturer, separated variable costs from fixed costs in order to conduct CVP analysis. Total variable costs for the period were $11,600. Total costs for the period were $20,000. Total units produced during the period were 200. What would the fixed cost per unit have been if Legend had produced 300 units?

Using the following data, apply the high-low method of cost analysis to the three cost data groups: What is the apparent total fixed cost for Alpha?

SwiftyShop is a gas station that sells 3 types of fuel: Regular Unleaded, Diesel, and Ethanol. The sales mix among the 3 fuel types remains relatively stable. SwiftyShop recorded the following data for the most recent month: Regular ($2.48/gallon average price): Sold 7,000 gallons, $1.23 cost/gallon Diesel ($2.39/gallon average price): Sold 15,000 gallons, $1.59 cost/gallon Ethanol ($1.59/gallon average price): Sold 3,000 gallons, $1.09 cost /gallon SwiftyShop's fixed expenses are $15,600 / month. SwiftyShop's tax rate is 20%. If SwiftyShop wants to generate after-tax net income of $14,000 next month, how many gallons of Ethanol will it need to sell? (Round unit contribution margins to the nearest cent. For both intermediate and final calculations, round the number of units up to the next full unit).

Using the following data, apply the high-low method of cost analysis to the three cost data groups: What cost behavior patterns are apparent for Scabbers?

Total costs for a company are usually composed of which of the following?

Remus Company sells a single product for $15 per unit. Variable costs are $5 per unit and fixed costs are $75,000. How many units must Remus sell to earn $25,000 before income tax?

United Manufacturing Inc. uses CVP tools to analyze overall costs. Total costs for the period were $200,000. Total sales for the period were $210,000, and the variable cost per unit was $30. United sold 700 units this period. What is United's break-even point in Sales Dollars?

Which method of cost data analysis employs a plot of data points, drawing a line to find an approximate "best visual fit"?

Trelawney Company has analyzed its overhead costs and derived a general formula for their behavior: $30,000 + $15 per direct labor hour employed. The company expects to use 60,000 direct labor hours during the next accounting period. What overhead rate per Direct Labor hour should be applied to jobs worked during the period?

Give an example of a fixed cost.

Cornelius' Cheeseburgers sells gourmet cheeseburgers. These cheeseburgers are so good, it is the only item on the menu. In recent years, Cornelius' breakeven point has been 40,000 cheeseburgers. Annual fixed cost are $200,000 and the cheeseburgers have a sales price of $15. What is the variable cost per unit of each cheeseburger?

What is a stepped cost?

Which of the following is an example of a fixed cost?

Jakob & Bailey Company charges a selling price of $30 per unit for its single product, incurs variable costs of $14 per unit, and total fixed costs of $280,000. Required: a. What unit sales volume is necessary to earn a net income before tax of $40,000? b. What sales volume is necessary to earn a net income after tax of $42,000, assuming a tax rate of 25%?

The high-low method uses the highest and lowest cost points to approximate a linear relationship between activities and costs.

Lumos Company sells a single product for $8 per unit. Variable costs are $5 per unit and fixed costs are $36,000. What is Lumos Company's break-even point in units?

On a cost-volume graph, costs are represented on the x-axis, and volume is represented on the y-axis.

Desired Net Income = Desired Sales - Total Variable Costs - Total Fixed Costs