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

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Question 21

True/False

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In an absorption costing income statement, the manufacturing margin is the excess of sales over the variable cost of goods sold.

A) True
B) False

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Question 22

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Spice Inc.'s unit selling price is $60, the unit variable costs are $35, fixed costs are $125,000, and current sales are 10,000 units. How much will operating income change if sales increase by 8,000 units?

A) $150,000 decrease
B) $175,000 increase
C) $200,000 increase
D) $150,000 increase

E) B) and C)
F) B) and D)

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Question 23

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The point where the sales line and the total costs line intersect on the cost-volume-profit chart represents:

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

Carrolton, Inc. currently sells widgets for $80 per unit. The variable cost is $30 per unit and total fixed costs equal $240,000 per year. Sales are currently 20,000 units annually.

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. The sales mix for product X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y.

Harold Corporation just started business in January 2012. They had no beginning inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000 units. The selling price of each unit was $20. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $2 per unit. Fixed manufacturing costs were $24,000 and fixed selling and administrative costs were $6,000. What would be the Harold Corporations Net income for 2012 using variable costing?

If fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?

The contribution margin ratio is:

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

The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed:

Variable costs are costs that vary in total in direct proportion to changes in the activity level.

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

Direct materials cost that varies with the number of units produced is an example of a fixed cost of production.

If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24, what is the break-even sales (units) ?

If fixed costs are $500,000 and the unit contribution margin is $20, what is the break-even point in units if fixed costs are reduced by $80,000?

If fixed costs are $350,000, the unit selling price is $29, and the unit variable costs are $20, what is the break-even sales (units) if the variable costs are decreased by $4?

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.

Given the following cost and activity observations for Bounty Company's utilities, use the high-low method to calculate Bounty' variable utilities costs per machine hour.

For purposes of analysis, mixed costs can generally be separated into their variable and fixed components.