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Exam 18: Cost-Volume-Profit Analysis

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Question 81

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The high-low method can be used to derive an estimated line of cost behavior.

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B) False

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Question 82

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Boston Co.is considering the production and sale of a new product with the following sales and cost data: unit sales price,$300; unit variable costs,$180; total fixed costs,$270,000; and projected sales,$900,000.What is the margin of safety: a.In dollar sales? b.As a percentage of sales?

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Contribution margin ratio = ($300 - $180...

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Question 83

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___________________________ is a statistical method of identifying an estimated line of cost behavior.

Reference: 18_03 A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. -The break-even point in units 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 dollars is:

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

Cost-volume-profit analysis provides approximate,but not precise,answers to questions about the relations among costs,volume,and profits.

Joseph Co.has three products A,B,and C,and its fixed costs are $69,000.The sales mix for its products are 3 units of A,4 units of B,and 1 unit of C. Information about the three products follows: $\begin{array}{lrrrr} &\text {A}&\text {B}&\text {C}\\\text { Projected sales in dollars } & \$ 192,00 & \$ 192,000 & \$ 64,000 \\& 0 & & \\\text { Selling price per unit } & \$ 40 & \$ 30 & \$ 40 \\\text { Contribution margin ratio } & 30 \% & 35 \% & 35 \%\end{array}$ a. Calculate the company's break-even point in composite units and sales dollars. b. Calculate the number of units of each individual product to be sold at the break-even point.

During the past year a company had total fixed costs of $700,000.Its product sold for $93 per unit.Variable costs during this time equaled $45 per unit.Next year the company is anticipating a 10% increase in total fixed costs and a $3 per unit decrease in variable costs but would like to maintain its current selling price per unit.How many units must the company sell next year to earn $1 million? (Round answer to complete units.)

A_______________ cost is one that remains unchanged in amount when volume of activity varies from period to period within a relevant range.A ______________ cost is one that changes in proportion to changes in volume of activity.

Duxbury Co.reports the following data for the current year: $\begin{array}{lr}\text { Units sold } & 1,200 \\\text { Unit sales price } & \$ 30 \\\text { Unit variable cost } & \$ 10 \\\text { Total fixed cost } & \$ 18,000\end{array}$ Required: a.Calculate the break-even point in units. b.Calculate Duxbury's pretax income. c.Calculate Duxbury's degree of operating leverage. d.)Calculate the margin of safety in units.

Leather Head Sports operates on a small production scale using expensive,top-quality materials.How does cost-volume-profit analysis benefit this company?

Management anticipates fixed costs of $72,500 and variable costs equal to 40% of sales.What will pretax income equal if sales are $325,000?

A company manufactures and sells a product for $150 per unit.The company's fixed costs are $68,200,and its variable costs are $95 per unit.The company's break-even point in dollars is:

The extent,or relative size,of fixed costs in the total cost structure is known as operating leverage.

Total contribution margin in dollars divided by pretax income is the:

A cost that can be separated into fixed and variable components is called a:

A cost that changes in total proportionately to changes in volume of activity is a(n) :

Degree of operating leverage (DOL)is defined as total contribution margin in dollars divided by pretax income.

Davison Company has fixed costs of $315,000 and a contribution margin ratio of 24%.If sales are expected to be $1,500,000,what is the margin of safety in percent?