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Exam 4: Cost Behavior and Cost-Volume-Profit Analysis

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Question 91

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If a business sells four products, it is not possible to estimate the break-even point.

A) True
B) False

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Question 92

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Harold Corporation just started business in January 2012. They had no beginning inventories. During 2012 they manufactured 12,000 units of product, and sold 10,000 units. The selling price of each unit was $20. Variable manufacturing costs were $4 per unit, and variable selling and administrative costs were $2 per unit. Fixed manufacturing costs were $24,000 and fixed selling and administrative costs were $6,000. What would be the difference in Harold Corporation's Net income for 2012 if they used variable costing instead of absorption costing?

A) No difference
B) $2,000 greater
C) $4,000 less
D) $6,000 less

E) All of the above
F) A) and B)

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Question 93

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Which of the graphs in Figure 20-1 illustrates the behavior of a total variable cost?

Penny Company sells 25,000 units at $59 per unit. Variable costs are $29 per unit, and loss from operations is ($50,000). Determine the (a) unit contribution margin (b) contribution margin ratio, and (c) fixed costs per unit at production of 25,000 units.

If a business sells two products, it is not possible to estimate the break-even point.

If employees accept a wage contract that decreases the unit contribution margin, the break-even point will decrease.

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

The reliability of cost-volume-profit analysis does NOT depend on the assumption that costs can be accurately divided into fixed and variable components.

The three most common cost behavior classifications are:

In order to choose the proper activity base for a cost, managerial accountants must be familiar with the operations of the entity.

When the fixed costs are $120,000 and the contribution margin is $30, the break-even point is

When a business sells more than one product at varying selling prices, the business's break-even point can be determined as long as the number of products does not exceed:

A company with a break-even point at $900,000 in sales revenue had fixed costs of $225,000. When actual sales were $1,000,000 variable costs were $750,000. Determine (a) the margin of safety expressed in dollars, (b) the margin of safety expressed as a percentage of sales, (c) the contribution margin ratio, and (d) the operating income.

The relative distribution of sales among the various products sold by a business is termed the:

Manley Co. manufactures office furniture. During the most productive month of the year, 4,500 desks were manufactured at a total cost of $86,625. In its slowest month, the company made 1,800 desks at a cost of $49,500. Using the high-low method of cost estimation, total fixed costs are:

Which of the following is not an assumption underlying cost-volume-profit analysis?

If direct materials cost per unit increases, the break-even point will decrease.

Companies with large amounts of fixed costs will generally have a high operating leverage.

If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, what is the contribution margin ratio?

If fixed costs are $850,000 and variable costs are 60% of sales, what is the break-even point (dollars) ?