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Exam 18: Cost Behavior and Cost-Volume-Profit Analysis

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Question 101

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Select cost information for Seacrest Enterprises is as follows: Based on this information:

A) Both direct materials and rent expense are variable costs.
B) Utilities expense is a mixed cost and rent expense is a variable cost.
C) Utilities expense is a mixed cost and rent expense is a fixed cost.
D) Direct materials is a fixed cost and utilities expense is a mixed cost.
E) Both direct materials and utilities expense are mixed costs.

F) B) and D)
G) B) and E)

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Question 102

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Wang Co.manufactures and sells a single product that sells for $450 per unit; variable costs are $270 per unit.Annual fixed costs are $800,000.Current sales volume is $4,200,000. -Compute the contribution margin ratio.

A) 40.0%.
B) 66.7%.
C) 20.7%.
D) 50.0%.
E) 19.3%.

F) C) and D)
G) B) and E)

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Question 103

Multiple Choice

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At Midland Company's break-even point of 9,000 units,fixed costs are $180,000 and variable costs are $540,000 in total.The unit sales price is:

A product sells for $200 per unit,and its variable costs per unit are $130.Total fixed costs are $420,000.If the firm wants to earn $35,000 pretax income,how many units must be sold?

The following information is available for a company's cost of sales over the last five months. Using the high-low method,the estimated total fixed cost is:

A product sells for $30 per unit and has variable costs of $18 per unit.The fixed costs are $720,000.If the variable costs per unit were to decrease to $15 per unit,fixed costs increase to $900,000,and the selling price does not change,break-even point in units would:

Assume that sales are predicted to be $3,750,the expected contribution margin is $1,500,and a net loss of $250 is anticipated.The break-even point in sales dollars is:

A company manufactures and sells a product for $120 per unit.The company's fixed costs are $68,760,and its variable costs are $90 per unit.The company's break-even point in units is:

Define the break-even point of a company.

The method most likely to produce the most precise line of cost behavior and require the least amount of judgment is the scatter diagram.

The following information is available for a company's cost of sales over the last four months. Use the high-low method to estimate the fixed and variable components of the cost of sales.

Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs,$24,000; direct labor costs,$12,000; and total fixed costs,$40,000.Sales were $60,000 based on 12,000 units sold during the period.Calculate the contribution margin and the contribution margin ratio.

An important assumption in multiproduct CVP analysis is a changing sales mix.

Fielder Productions reports the following information: Required: (a)Calculate Fielder's degree of operating leverage (DOL). (b)If sales increase by 6%,what is the expected percentage increase in pretax income?

McCoy Brothers manufactures and sells two products,A and Z in the ratio of 5:2.Product A sells for $75; Z sells for $95.Variable costs for product A are $35; for Z $40.Fixed costs are $418,500.Compute the number of units of Product A McCoy must sell to break even.

Margin Company has total fixed costs of $360,000 and variable costs of $14 per unit.If the unit sales price is reduced from $24 to $20 and advertising is increased by $10,000,sales will increase from 40,000 to 65,000 units.Should Margin reduce its per unit sales price and pay for the additional advertising? (Support your answer with calculations.)

The budgeted income statement presented below is for Burkett Corporation for the coming fiscal year.If Burkett Corporation achieves the budgeted level of sales,what will be its margin of safety in dollars?

A cost that changes as volume changes,but at a nonconstant rate,is called a:

Define variable cost,fixed cost,and mixed cost.

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