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Exam 5: Cost Behavior Cost-Volume-Profit Analysis

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Question 101

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Glover Headgear produces specialty logo baseball caps for a variety of customers. Selected cost data for Glover follows: direct materials cost $8,000; sales commissions, $9,000; depreciation on factory equipment, $21,000; factory labor, $16,000; factory lease, $24,000. If Glover sells 6,100 caps at an average price of $12 for each cap, what is the company's contribution margin in total dollars?

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Question 102

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The high-low method is used to derive the variable cost per unit and total fixed costs using just the highest and lowest volume levels.

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Question 103

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A cost-volume-profit chart is also known as a(n)

Benjamin Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are 3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows: A B C (a) Calculate the company's break-even point in composite units and sales dollars. (b) Calculate the number of units of each individual product to be sold at the break-even point.

Maroon Company's contribution margin ratio is 24%. Total fixed costs are $84,000. What is Maroon's break-even point in sales dollars?

The margin of safety is the amount that sales can drop before the company incurs a loss.

Mullis Corp. manufactures DVDs that sell for $5.00. Fixed costs are $28,000 and variable costs are $3.60 per unit. Mullis can buy a newer production machine that will increase fixed costs by $8,000 per year, but will decrease variable costs by $0.40 per unit. What effect would the purchase of the new machine have on Mullis' break-even point in units?

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. Compute the number of units that must be sold in order to achieve a target pretax income of $130,000.

The ________ is the sales level at which a company neither earns a profit nor incurs a loss.

The least-squares regression method is:

Curvilinear costs increase as volume of activity increases, but at a nonconstant rate.

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year. If Burkett Corporation is able to achieve the budgeted level of sales, its margin of safety in dollars would be:

Craft Company and Jarmer Company each have sales of $200,000 and costs of $140,000. Craft Company's costs consist of $40,000 fixed and $100,000 variable, while Jarmer Company's costs consist of $100,000 fixed and $40,000 variable. Which company will suffer the greatest decline in profits if sales volume declines by 15%? Prepare income statements and compute degree of operating leverage to assess.

A cost that changes in proportion to changes in volume of activity is a(n) :

A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The break-even point in units is:

A cost that remains unchanged in total despite variations in volume of activity within a relevant range is a:

The absorption costing method is required for external financial reporting.

To determine the slope of the variable cost from a scatter diagram, divide the change in cost by the change in units.

A company has fixed costs of $90,000. Its contribution margin ratio is 30% and the product sells for $75 per unit. What is the company's break-even point in dollar sales?

Expanse Co. is considering the production and sale of a new product line with the following sales and cost data: unit sales price $125; unit variable costs $50; and total fixed costs of $150,000. Calculate the break-even point in units and in dollar sales.