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Exam 5: Cost Behavior and Cost-Volume-Profit Analysis

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Question 81

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A cost-volume-profit (CVP)chart is a graph that plots volume on the horizontal axis and costs and sales on the vertical axis.

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B) False

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Question 82

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A company has total fixed costs of $200,000.Its product sells for $25 per unit and variable costs amount to $15 per unit.The company wishes to earn an after-tax income of $35,000.Assume that the company has a 30% tax rate.How many units must be sold to achieve this after-tax income level?

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Targeted pretax income = $35,0...

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Question 83

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A company sells a single product that has a contribution margin ratio of 24%.If the company's total fixed costs are $84,000, what is the break-even point in dollar sales?

A cost that changes in total proportionately to changes in volume of activity is a(n) :

A company manufactures and sells a product for $150 per unit.The company's fixed costs are $68,200, and its variable costs are $95 per unit.The company's break-even point in units is:

Unit contribution margin is the amount each unit contributes to both fixed costs and net income.

Total contribution margin in dollars divided by pretax income is the:

The following data relate to a product sold by Nelson Company: $\begin{array}{lr}\text { Total variable costs } &\$ 90,000 \\\text { Total fixed costs } &27,000 \\\text { Predicted after-tax income (30\% tax) } &12,600\\\text { Contribution margin per unit } &5\end{array}$ (a)Calculate the number of units expected to be sold. (b)Calculate the expected total dollar sales.

Identify items (a), (b), and (c)in the cost-volume-profit chart shown below.

A company has fixed costs of $90,000.Its contribution margin ratio is 30% and the product sells for $75 per unit.What is the company's break-even point in dollar sales?

A product sells for $200 per unit, and its variable costs per unit are $130.The fixed costs are $420,000.If the firm wants to earn $35,000 pretax income, how many units must be sold?

Cost-volume-profit analysis is based on three basic assumptions.Which of the following is not one of these assumptions?

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 units is:

The high-low method can be used to derive an estimated line of cost behavior.

Cost-volume-profit analysis can be used to predict the effects of reduced selling prices, increased fixed costs, and reduced variable costs on break-even points.

Beard Enterprises has collected the following data in order to analyze the behavior of their costs: $\begin{array}{|c|c|c|}\hline \text { Month } & \text { Units Produced } & \text { Total Cost } \\\hline \text { January } & 17,500 & \$ 20,500 \\\hline \text { February } & 27,500 & \$ 21,500 \\\hline \text { March } & 25,000 & \$ 25,000 \\\hline \text { April } & 35,000 & \$ 21,500 \\\hline \text { May } & 47,500 & \$ 25,500 \\\hline \text { June } & 22,500 & \$ 18,500 \\\hline\end{array}$ a.Using the high-low method, calculate the variable cost per unit and the estimated fixed costs. b.Using the resulting relationship, predict the costs if they produce 28,000 units in a future period.

Ginger Company's product has a contribution margin per unit of $11.25 and a contribution margin ratio of 22.5%.What is the selling price of the product?

The sales mix of Palm Company is 5 units of A, 3 units of B, and 1 unit of C.Per unit sales prices for each product are $30, $40, and $50, respectively.Variable costs per unit are $14, $24, and $34, respectively.Fixed costs are $597,600.What is the break-even point in composite units and in units of A, B, and C?

Briefly describe a CVP chart, including its major components.

A graphic presentation of cost-volume-profit data is known as a __________________ graph (or chart); this presentation is also sometimes called a ______________ chart.