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Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

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Question 61

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Most operating decisions of management focus on a narrow range of activity called the

A) relevant range of production
B) strategic level of production
C) optimal level of production
D) tactical operating level of production

E) B) and C)
F) A) and B)

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Question 62

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If the volume of sales is $7,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 45.8%.

A) True
B) False

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Question 63

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The Tom Company reports the following data: Determine Tom Company's operating leverage.

What would Timmer's net income be for the year using absorption costing?

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

If fixed costs are $561,000 and the unit contribution margin is $8.00, what is the break-even point in units if variable costs are decreased by $0.50 a unit?

Given the following: Variable cost as a percentage of sales = 60% Unit variable cost = $30 Fixed costs = $200,000 What is the break-even point in units?

Direct materials and direct labor costs are examples of variable costs of production.

When Isaiah Company has fixed costs of $120,000 and the contribution margin is $30, the break-even point is

O'Boyle Co.'s fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20, what is the break-even sale units?

If direct materials cost per unit increases, the break-even point will decrease.

Total fixed costs change as the level of activity changes.

Which of the following statements is true regarding fixed and variable costs?

Companies with large amounts of fixed costs will generally have a high operating leverage.

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

Which of the graphs in Figure 21-1 illustrates the behavior of a total variable cost?

Costs that remain constant in total dollar amount as the level of activity changes are called

Penny Company sells 25,000 units at $59 per unit.Variable costs are $29 per unit, and loss from operations is $50,000.Determine the a unit contribution margin b contribution margin ratio, and c fixed costs per unit at production of 25,000 units.

If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume, and can immediately see the effects of each change on the break-even point and profit.This is called