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Exam 20: Cost-Volume-Profit Analysis

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Question 1

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Match each of the following costs with the graph (a-e) that best portrays its cost behavior as the number of units produced and sold increases. -Straight-line depreciation on factory equipment A)Graph 1 B)Graph 2 C)Graph 3 D)Graph 4 E)Graph 5

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Question 2

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

A) Graph 2
B) Graph 3
C) Graph 4
D) Graph 1

E) B) and C)
F) A) and D)

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Question 3

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The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed _____ analysis.

A low operating leverage is normal for highly automated industries.

Which of the following conditions would cause the break-even point to increase?

Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45, and total fixed costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000 but decrease the variable costs per unit to $42.If Louis Company expects to sell 44,000 units next year, should it purchase this new equipment?

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows: ​ -For break-even analysis, the unit variable cost of E was

Given the following cost and activity observations for George Company's utilities, use the high-low method to determine George's variable utilities cost per machine hour.

Given the following costs and activities for Dance Company's electrical costs, use the high-low method to determine Dance's variable electrical costs per machine hour.

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

Bluegill Company sells 45,000 units at $18 per unit. Fixed costs are $62,000, and operating income is $298,000. Determine the (a) variable cost per unit, (b) unit contribution margin, and (c) contribution margin ratio.

Grant Company has sales of $300,000, and the break-even point in sales dollars is $225,000. Determine the company's margin of safety percentage.

Figure 1 ​ -Which of the following graphs in Figure 1 illustrates the nature of a mixed cost?

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating income (loss) was

Atlantic Company sells a product with a break-even point of 3,000 sales units. The variable cost is $60 per unit, and fixed costs are $270,000.​ Determine the (a) unit sales price and (b) break-even point in sales units if the company desires a target profit of $36,000.

For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32, and a unit selling price of $40. For the coming year, no changes are expected in revenues and costs, except that property taxes are expected to increase by $10,000. Determine the break-even sales (units) for (a) the past year and (b) the coming year.

Match each of the following costs of producing T-shirts with the appropriate classification (a-c). -Advertising costs of $12,000 per month A)Variable cost B)Fixed cost C)Mixed cost

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

Which of the following is an example of a mixed cost?

Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?