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Exam 22: Cost-Volume-Profit Analysis

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Question 31

True/False

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Variable costs per unit increase proportionately with increases in output activity.

A) True
B) False

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Question 32

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A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n) :

A) Step-wise cost.
B) Fixed cost.
C) Curvilinear cost.
D) Incremental cost.
E) Opportunity cost.

F) B) and C)
G) C) and E)

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Question 33

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Baines Brothers manufactures and sells two products, A and Z in the ratio of 4:2. Product A sells for $75; Z sells for $95. Variable costs for product A are $35; for Z $40. Fixed costs are $418,500. Compute the contribution margin per composite unit.

Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the contribution margin per unit.

The contribution margin per unit expressed as a percentage of the product's selling price is the:

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

A product is sold for $45 and has variable costs of $33 per unit. The total fixed costs for the firm are $180,600. If the firm desires to earn a pretax income of $77,400, how many units must be sold?

Assume that sales are predicted to be $3,750, the expected contribution margin is $1,500, and a net loss of $250 is anticipated. The break-even point in sales dollars is:

Hartman Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

What are the unit contribution margin and the contribution margin ratio? What do these measures reveal about a company's cost structure?

The least-squares regression method is:

When using the high-low method for estimating cost behavior, the slope, or variable cost per sales dollar, is calculated by __________________________________.

The following information describes a product expected to be produced and sold by Pepin Corporation: Required: (a) Calculate the contribution margin per unit. (b) Calculate the break-even point in units.

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 percent of sales?

Describe what happens to the net income of a company under each of the following assumptions: (a) Sales volume is less than break-even sales. (b) Sales volume is greater than break-even sales. (c) Sales volume is equal to the break-even point.

Ivan Company has a goal of earning $70,000 after-tax income. Ivan would need to pay $20,000 of income taxes at the target level of income. The contribution margin ratio is 30%. What amount of dollar sales must be achieved to reach the goal if fixed costs are $36,000?

Hess Co. manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit. What effect would the purchase of the new machine have on Hess's break-even point in units?

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:

The ratio of the volumes of the various products sold by a company is called the _____________________________.

Lee Company manufactures and sells widgets for $2.00 per unit. Its variable cost per unit is $1.70. Lee's total fixed costs are $10,500. How many widgets must Lee Company sell to break even?