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

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Question 31

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A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. -The contribution margin per unit is: A.$5.00 B.$7.00 C.$8.17 D.$12.00 E.$17.00

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Question 32

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The contribution margin per unit is equal to the sales price per unit minus the variable costs per unit.

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B) False

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Question 33

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The contribution margin ratio is the percentage by which the margin of safety exceeds the break-even point.

The high-low method is used to derive an estimated line of cost behavior by graphically connecting the two cost amounts identified with the highest and lowest volume levels.

A line on a scatter diagram that is intended to reflect the past relation between cost and volume is the:

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

The least-squares regression method is:

The extent, or relative size, of fixed costs in the total cost structure is known as operating leverage.

A product has a contribution margin per unit of $17 and sells at $25 per unit.If the break-even point is 82,000 units, calculate (a)the variable costs per unit and (b)the total fixed costs.

A company manufactures and sells a product for $91 per unit.The company's fixed costs are $859,716 and its variable costs are $25 per unit.What is the company's break-even point in dollars? (Round all calculations to 2 decimal places.)

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:

What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?

One aid in measuring cost behavior involves creating a display of the data about past costs in graphical form.Such a visual display is called a ______________________.

A product sells for $200 per unit, and its variable costs per unit are $130.The fixed costs are $420,000.What is the break-even point in dollar sales?

Management of a company is evaluating two potential orders.Due to limited capacity only one of these orders can be accepted.Incremental fixed costs are the same for either option.Based on the information in the table below, which of the following statements is true? $\begin{array}{|l|l|l|}\hline & \text { Option A } & \text { Option B } \\\hline \text { Number of units } & 30 & 40 \\\hline \text { Contribution margin ratio } & 35 \% & 45 \% \\\hline \text { Selling price per unit } & \$ 400 & \$ 300 \\\hline\end{array}$

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 percentage of sales?

The margin of safety is the amount that sales can drop before the company incurs a loss.

Total variable costs change proportionately with changes in output activity.

A target income refers to:

A product sells for $210 per unit, and its variable costs per unit are $130.The fixed costs are $420,000.If the firm wants to earn $35,000 after tax income (assume a 30% tax rate) , how many units must be sold?