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Exam 19: Cost Behavior and Cost-Volume-Profit Analysis

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Question 61

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Global Publishers has collected the following data for recent months:

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a) Variable cost per unit = $22,464 - ...

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Question 62

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Match the following terms a-e) with their definitions. -Indicates the possible decrease in sales that may occur before operating loss results

A) Profit-volume chart
B) Cost-volume-profit chart
C) Sales mix
D) Operating leverage
E) Margin of safety

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

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Question 63

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Figure 21-1 -Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service?

Total variable costs change as the level of activity changes.

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: $\begin{array} { l l l l } & \text { Unit Selling } & \text { Unit Variable } & \text { Unit Contribution } \\\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \\\hline \text { Arks } & \$ 120 & \$ 80 & \$ 40 \\\text { Bins } & 80 & 60 & 20\end{array}$ -What was Carter Co.'s variable cost of E?

Given the following cost and activity observations for Smithson Company's utilities, use the high­low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.

A company with a break-even point at $900,000 in sales revenue had fixed costs of $225,000. When actual sales were $1,000,000 variable costs were $750,000. Determine a) the margin of safety expressed in dollars, b) the margin of safety expressed as a percentage of sales, c) the contribution margin ratio, and d) the operating income.

If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.

Perfect Stampers makes and sells aftermarket hub caps. The variable cost for each hub cap is $4.75 and the hub cap sells for $9.95. Perfect Stampers has fixed costs per month of $3,120. Compute the contribution margin per unit and break-even sales in units and in dollars for the month.

The graph of a variable cost when plotted against its related activity base appears as a

If a business had a capacity of $10,000,000 of sales, actual sales of $6,000,000, break-even sales of $4,200,000, fixed costs of $1,800,000, and variable costs of 60% of sales, what is the margin of safety expressed as a percentage of sales?

The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents

Unit variable cost does not change as the number of units of activity changes.

Total fixed costs change as the level of activity changes.

For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32, and a unit selling price of $40. For the coming year, no changes are expected in revenues and costs, except that property taxes are expected to increase by $10,000. Determine the break-even sales units) for a) the past year and b) the coming year.

If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point.

For the coming year, River Company estimates fixed costs at $109,000, the unit variable cost at $21, and the unit selling price at $85. Determine a) the break-even point in units of sales, b) the unit sales required to realize operating income of $150,000 and c) the probable operating income if sales total $500,000. Round units to the nearest whole number and percentage to one decimal place.

O'Boyle Co.'s fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20, what is the break-even sale units) ?

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 11,500 units.