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Exam 11: Cost Behavior and Cost-Volume-Profit Analysis

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Question 71

True/False

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The graph of the variable costs when plotted against the activity level appears as a line parallel to horizontal axis.

A) True
B) False

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Question 72

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Which of the following conditions would cause the break-even point to increase?

A) Decrease in total fixed costs
B) Increase in unit selling price
C) Decrease in unit variable cost
D) Increase in unit variable cost

E) None of the above
F) All of the above

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Question 73

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

Kennedy Co. sells two products, Arks and Bins. Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins. Related data are: Use the above given data to solve the following questions: Refer to the information provided for Kennedy Co. Assuming that last year's fixed costs totaled $910,000, what was Kennedy's break-even point in units?

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

Tucker Co. manufactures office furniture. During the most productive month of the year, 3,600 desks were manufactured at a total cost of $192,000. In its slowest month, the company made 1,200 desks at a cost of $72,000. Using the high-low method of cost estimation, total fixed costs per month are:

The break-even point (in units) is calculated by dividing the total estimated fixed costs by the net sales of a period.

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

The contribution margin ratio is:

For the current year ending April 30, Philip Company expects fixed costs of $70,000, a unit variable cost of $45, and a unit selling price of $95. (a) Compute the anticipated break-even saless (in units). (b) Compute the sales (in units) required to realize an operating profit of $\$ 8,000$ .

If the volume of sales is $6,000,000 and sales at the break-even point amount to $5,000,000, the margin of safety will be 20%.

The following is a list of various costs of producing sweatshirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.

If fixed costs are $300,000 and variable costs are 70% of break-even sales, profit is zero when sales revenue is $1,000,000.

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 will be 25%.

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

In cost-volume-profit analysis, all costs are classified into the following two categories:

For the past year, Cline Company had fixed costs of $6,552,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (in units) for (a) the past year and (b) the coming year.

If fixed costs are $850,000 and variable costs are 60% of the sales, what is the break-even point (in dollars) ?

If sales are $820,000, variable costs are 68% of sales, and operating income is $260,000, what is the contribution margin ratio?

Tops Company sells Products D and E and has made the following estimates for the coming year: $\begin{array}{clll}\text { Sales Mix } & \text { Unit Variable Cost } & \text { Unit SellingPrice } & \text { Product } \\\hline 60 \% & \$ 24 & \$ 30 & \mathrm{D} \\40 & 56 & 70 & \mathrm{E}\end{array}$ Fixed costs are estimated at $202,400. Determine (a) the estimated sales in units of the overall product necessary to reach the break-even point for the coming year, (b) the estimated number of units of each product necessary to be sold to reach the break-even point for the coming year, and (c) the estimated sales in units of the overall product necessary to realize an operating income of $119,600 for the coming year.