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Exam 22: Cost-Volume-Profit

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Question 41

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Murphy Company produces flash drives for computers which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During April 700 drives were sold. Fixed costs for April were $4 per unit for a total of $2800 for the month. How much does Murphy's operating income increase for each $1000 increase in revenue per month?

A) $700
B) $500
C) $14000
D) Not enough information to determine the answer.

E) None of the above
F) A) and C)

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Question 42

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A cost which remains constant per unit at various levels of activity is a

A) variable cost.
B) fixed cost.
C) mixed cost.
D) manufacturing cost.

E) None of the above
F) All of the above

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Question 43

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Boswell company reported the following information for the current year: Sales (50000 units) $1000000 direct materials and direct labor $500000 other variable costs $50000 and fixed costs $360000. What is Boswell's contribution margin ratio?

Farmers' Industries has fixed costs of $600000 and variable costs are 60% of sales. How much will Farmers report as sales when its net income equals $60000?

The high-low method is used in classifying a mixed cost into its variable and fixed elements.

Contribution margin is the amount of revenues remaining after deducting cost of goods sold.

In CVP analysis the term "cost"

An assumption of CVP analysis is that variable and fixed costs have a _______________ relationship with an activity base.

The activity level is represented by an activity index such as direct labor hours units of output or sales dollars.

Norton Inc. has the following information available for September 2016. $\begin{array}{lr}\text { Unit selling price of video game consoles } & \$ 400 \\\text { Unit variable costs } & \$ 280 \\\text { Total fixed costs } & \$ 48,000 \\\text { Units sold } & 500\end{array}$ Instructions (a) Prepare a CVP income statement that shows both total and per unit amounts. (b) Compute Norton's breakeven in units.

Which one of the following is a name for the range over which a company expects to operate?

A company requires $1700000 in sales to meet its net income target. Its contribution margin is 30% and fixed costs are $300000. What is the target net income?

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

The trend in most companies is to have more variable costs and fewer fixed costs.

CVP analysis does not consider

Unit fixed costs __________________ with the changes in the level of activity.

Ferris Inc. has a unit selling price of $500 variable cost per unit of $300 and fixed costs of $260000. Instructions Compute the break-even point in units and in sales dollars.

How much sales are required to earn a target net income of $200000 if total fixed costs are $250000 and the contribution margin ratio is 40%?

Marvin Co. had a net loss of $150000 in 2015 when the selling price per unit was $20 the variable costs per unit were $15 and the fixed costs were $600000. Management expects per unit data and total fixed costs to be the same in 2016. Management has set a goal of earning net income of $75000 in 2016. Instructions (a) Compute the units sold in 2015. (b) Compute the number of units that would have to be sold in 2016 to reach management's desired net income level. (c) Assume that Marvin Co. sells the same number of units in 2016 as it did in 2015. What would the selling price have to be in order to reach the target net income? Use the mathematical equation.

Firms operating at 100% capacity