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Exam 21: Cost-Volume-Profit Analysis

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Question 81

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A statistical method for identifying cost behavior is the:

A) High-low method.
B) Scatter diagram method.
C) Least-squares regression method.
D) CVP charting method.
E) Composite method.

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

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Question 82

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Carver Packing Company reports total contribution margin of $72,000 and pretax net income of $24,000 for the current month. In the next month, the company expects sales volume to increase by 8%. The degree of operating leverage and the expected percent change in income, respectively, are:

A) 0.33 and 2.7%
B) 3.0 and 8%
C) 3.0 and 24%
D) 4.0 and 32%
E) 0.33 and 8%

F) A) and B)
G) A) and C)

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Question 83

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The Goldfarb Company manufactures and sells toasters. Each toaster sells for $23.75 and the variable cost per unit is $16.25. Goldfarb's total fixed costs are $25,000, and budgeted sales are 8,000 units. What is the contribution margin per unit?

Barclay Enterprises manufactures and sells three distinct styles of bicycles: the Youth model sells for $300 and has a unit contribution margin of $105; the Adult model sells for $850 and has a unit contribution margin of $450; and the Recreational model sells for $1,000 and has a unit contribution margin of $500. -The company's sales mix includes: 5 Youth models; 9 Adult models; and 6 Recreational models. If the firm's annual fixed costs total $6,500,000, calculate the firm's contribution margin ratio per composite unit (rounded to the nearest whole percentage) .

Alvarez Company's break-even point in units is 1,000. The sales price per unit is $10 and variable cost per unit is $7. If the company sells 2,500 units, what will net income be?

During March, a firm expects its total sales to be $160,000, its total variable costs to be $95,000, and its total fixed costs to be $25,000. The contribution margin for March is:

A product sells for $200 per unit, and its variable costs are 65% of sales. The fixed costs are $420,000. What is the break-even point in sales dollars?

Describe how a cost-volume-profit analysis would be performed for a company that sells more than one product when the sales mix is known.

A cost that remains unchanged in total despite variations in volume of activity within a relevant range is a:

The relevant range of operations includes extremely high and low levels of production that are unlikely to occur.

A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit, fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:

There are only two methods to derive an estimated line of cost behavior; the high-low method and the scatter diagram.

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

Use the following information to determine the break-even point in sales dollars: $\begin{array} { l c } \text { Unit sales } & 50,000 \text { Units } \\\text { Dollar sales } & \$ 500,000 \\\text { Fixed costs } & \$ 204,000 \\\text { Variable costs } & \$ 187,500\end{array}$

Locus Company has total fixed costs of $112,000. Its product sells for $35 per unit and variable costs amount to $25 per unit. Next year Locus Company wishes to earn a pretax income that equals 10% of fixed costs. How many units must be sold to achieve this target income level?

Under variable costing, fixed overhead costs are excluded from product costs.

Gladstone Co. has expected sales of $326,000 for the upcoming month and its monthly break even sales are $300,000. What is the margin of safety as a percent of sales, rounded to the nearest whole percent?

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. - The total product cost per unit under absorption costing is:

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

Whiting Company sells a mix of three related products. Total fixed costs are $144,000. The following additional information is available for Whiting Company. $\begin{array} { l | c | c | l } & \begin{array} { c } \text { Sales } \\\text { Mix }\end{array} & \begin{array} { c } \text { Variable } \\\text { Cost/Unit }\end{array} & \begin{array} { l } \text { Sales } \\\text { Price/Unit }\end{array} \\\hline \mathrm { X } & 4 & \$ 4 & \$ 9 \\\hline \mathrm { Y } & 4 & \$ 8 & \$ 14 \\\hline \mathrm { Z } & 2 & \$ 7 & 15\end{array}$ Determine the company's break-even point in composite units.