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Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

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Question 51

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Spice Inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 8,000 units?

A) $150,000 decrease
B) $175,000 increase
C) $200,000 increase
D) $150,000 increase

E) None of the above
F) A) and D)

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Question 52

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(a) If Swannanoa Company's budgeted sales are $1,000,000, fixed costs are $350,000, and variable costs are $600,000, what is 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?

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(a) Contrbution margin = $1,00...

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Question 53

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Cost-volume-profit analysis cannot be used if which of the following occurs?

A rental cost of $20,000 plus $.70 per machine hour of use is an example of a mixed cost.

Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $80 per unit. Round your answer to the nearest whole number.

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.

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 absorption costing?

Cost behavior refers to the manner in which:

A cost that has characteristics of both a variable cost and a fixed cost is called a:

Which of the graphs in Figure 20-1 illustrates the behavior of a total fixed cost?

If fixed costs are $700,000 and the unit contribution margin is $17, what amount of units must be sold in order to realize an operating income of $100,000?

Cordell, Inc. has an operating leverage of 3. Sales are expected to increase by 9% next year. What is the expected change in operating income next year?

Even if a business sells six products, it is possible to estimate the break-even point.

If the volume of sales is $6,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 25%.

Which of the following is an example of a cost that varies in total as the number of units produced changes?

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

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

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 60%.