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Exam 5: Cost Behavior Cost-Volume-Profit Analysis

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Question 81

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Managers can use variable costing information for internal decision making, but they must use absorption costing for external reporting purposes.

A) True
B) False

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Question 82

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Johnston Co. anticipates total fixed costs of $120,000 and variable costs equal to 40% of sales. What is the pretax income if sales are $650,000?

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Pretax Income = $650...

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Question 83

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During March, a firm expects its total sales to be $160,000, its total variable costs to be $95,000, and its total fixed costs to be $25,000. The contribution margin for March is:

A firm sells two different products, A and B. For each unit of B, the firm sells two units of A. Total fixed costs for this firm are $1,260,000. Additional selling prices and cost information for both products follow: Required: (a) Calculate the contribution margin per composite unit. (b) Calculate the break-even point in units of each individual product. (c) If pretax income before taxes of $294,000 is desired, how many units of A and B must be sold?

Mott Company's sales mix is 3 units of A, 2 units of B, and 1 unit of C. Selling prices for each product are $20, $30, and $40, respectively. Variable costs per unit are $12, $18, and $24, respectively. Fixed costs are $320,000. What is the break-even point in composite units?

A company sells a single product that has a contribution margin ratio of 28%. If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

The following information describes a product expected to be produced and sold by Quark Corporation: Selling price $33 per unit Variable costs $27 per unit Total Fixed costs $855,000 per year Required: (a) Calculate the contribution margin per unit. (b) Calculate the break-even point in units.

Cost-volume-profit analysis requires management to classify all costs as either fixed or variable with respect to production or sales volume within the relevant range of operations.

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

A company manufactures and sells searchlights. Each searchlight sells for $345. The variable cost per unit is $198, and the company's total fixed costs are $635,000. Predicted sales are 15,000 units. What is the contribution margin per unit?

In Keegan Corporation's most recent fiscal year, the company reported pretax earnings of $215,000. Fixed costs totaled $325,800, the unit selling price of the firm's only product was $60, and the variable costs per unit were 40% of the selling price. Based on this information, the firm's break-even point in units was:

Discuss how CVP analysis can be useful in planning.

The sales mix of Desert Springs Company is 5 units of A, 3 units of B, and 1 unit of C. Per unit sales prices for each product are $30, $40, and $50, respectively. Variable costs per unit are $14, $24, and $34, respectively. Fixed costs are $597,600. What is the break-even point in composite units and in units of A, B, and C?

Describe and compare the three cost estimation methods used to develop a cost equation.

Describe what happens to the net income of a company under each of the following assumptions: (a) Units sold are less than break-even units. (b) Units sold are greater than break-even units. (c) Units sold are equal to the break-even units.

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is:

Fuschia Company's contribution margin per unit is $12. Total fixed costs are $84,000. What is Fuschia's break-even point in units?

Use the following information to determine the break-even point in units (rounded to the nearest whole unit) :

The following information is available for a company's utility cost for operating its machines over the last four months. Using the high-low method, the estimated variable cost per unit for utilities is:

A firm expects to sell 25,000 units of its product at $11 per unit and to incur variable costs per unit of $6. Total fixed costs are $70,000. The total contribution margin is: