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

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Question 111

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

A) $25.42.
B) $77.50.
C) $34.23.
D) $15.00.
E) $30.62.

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

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Question 112

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Bing Company's contribution margin income statement is presented below.Sales for the current period consisted of 7,500 units.Compute the company's break-even point in (a)units,and (b)dollars.Compute the margin of safety in (c)dollars and (d)percent.

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Per unit costs:
Sales price = $225,000/7...

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Question 113

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Kent Co.manufactures a product that sells for $50.00.Fixed costs are $260,000 and variable costs are $24.00 per unit.Kent can buy a new production machine that will increase fixed costs by $11,400 per year,but will decrease variable costs by $3.50 per unit.Compute the revised break-even point in dollars with the purchase of the new machine.

What are the cost behaviors per unit and in total for variable cost and fixed costs within the relevant range?

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:

A step-wise variable cost can be separated into a fixed component and a variable component.

A graphic presentation of cost-volume-profit data is known as a ________ graph (or chart); this presentation is also sometimes called a ________ chart.

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?

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

The variable costing method is required for external financial reporting.

A manufacturer reports the following information below for its first three years in operation. -Income for year 1 using absorption costing is:

A ________ cost is one that remains unchanged despite variations in the volume of activity within a relevant range.A ________ cost is one that changes in proportion to changes in volume of activity.

What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?

Leeks Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%.What is the selling price of the product?

What is the high-low method? Briefly describe how it is applied.

Scatter diagrams plot volume (units)on the horizontal axis and cost on the vertical axis.

Cost-volume-profit analysis is used to determine the number of units that must be sold to break even..

Henderson Co.has fixed costs of $36,000 and a contribution margin ratio of 24%.If expected sales are $200,000,what is the margin of safety as a percent of sales?

Cost-volume-profit analysis cannot be used when a firm produces and sells more than one product.

McCoy Brothers manufactures and sells two products,A and Z in the ratio of 4:2.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 Z McCoy must sell to break even.