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

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Question 101

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Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

A) unaffected
B) expected to increase by 3%
C) expected to increase by 48%
D) expected to increase by 4 %

E) All of the above
F) C) and D)

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Question 102

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Bryce Co. sales are $914,000, variable costs are $498,130, and operating income is $196,000. What is the contribution margin ratio?

A) 52.2%
B) 28.4%
C) 54.5%
D) 45.5%

E) C) and D)
F) None of the above

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Question 103

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Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will operating income change if sales increase by 5,000 units?

If fixed costs are $850,000 and the unit contribution margin is $50, profit is zero when 15,000 units are sold.

Roller Paint Co. reported the following data for the month of September. There were no beginning inventories and all units were completed no work in process). In the month of September, 28,000 of the 30,000 units manufactured were sold at a price of $80 per unit. a) Prepare a variable costing income statement. b) Prepare an absorption costing income statement. c) Briefly explain why there is a difference in income from operations between the two methods.

A firm operated at 90% of capacity for the past year, during which fixed costs were $420,000, variable costs were 40% of sales, and sales were $1,000,000. Operating profit was

The point where the profit line intersects the horizontal axis on the profit-volume chart represents

Reynold's Grocery has fixed costs of $350,000, the unit selling price is $29, and the unit variable costs are $20. What is the break-even sale units) if the variable costs are decreased by $4?

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 14,500 units.

Match the following terms with their definitions. -Remain the same in total dollar amount as the level of activity changes

Beemer's sales are $400,000, variable costs are 75% of sales, and operating income is $50,000. The operating leverage is

If a business sells two products, it is not possible to estimate the break-even point.

Define operating leverage. Explain the relationship between a company's operating leverage and how a change in sales is expected to impact profits.

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

Break-even analysis is one type of cost-volume-profit analysis.

For the past year, Iris Company had fixed costs of $6,708,000, 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 units) for a) the past year and b) the coming year.

Cost behavior refers to the manner in which a cost changes as the related activity changes.

As production increases, variable costs per unit

Assuming that last year's fixed costs totaled $675,000. What was Rusty Co.'s break­even point in units?

For the current year ending April 30, Hal Company expects fixed costs of $60,000, a unit variable cost of $70, and anticipated break-even of 1,715 sales units. a) Compute the unit sales price. b) Compute the sales units) required to realize an operating profit of $8,000. Round your answer to the nearest whole number.