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

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Question 1

True/False

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Variable costs are costs that remain constant in total dollar amount as the level of activity changes.

A) True
B) False

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Question 2

Multiple Choice

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Given the following cost and activity observations for George Company's utilities, use the high­low method to calculate George's variable utilities costs per machine hour.

A) $100.00
B) $1.00
C) $10.00
D) $0.10

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

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D

Question 3

Multiple Choice

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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 profit loss was

Cordell, Inc.has an operating leverage of 3.Sales are expected to increase by 9% next year.What is the expected change in operating income next year?

What was Carter Co.'s unit contribution margin of E?

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

Which of the following activity bases would be the most appropriate for gasoline costs of a delivery service?

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

The difference between the current sales revenue and the sales at the break-even point is called the

Perfect Stampers makes and sells aftermarket hub caps.The variable cost for each hub cap is $4.75 and the hub cap sells for $9.95.Perfect Stampers has fixed costs per month of $3,120.Compute the contribution margin per unit and break-even sales in units and in dollars for the month.

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

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

Global Publishers has collected the following data for recent months: Required: a Using the high-low method, find variable cost per unit, total fixed costs, and the total cost equation. b What is the estimated cost for a month in which 19,000 issues are published?

What was Rusty Co.'s weighted average unit selling price?

What was Rusty Co.'s sales mix last year?

If the contribution margin ratio for France Company is 45%, sales were $425,000, and fixed costs were $100,000, what was the income from operations?

Which of the following activity bases would be the most appropriate for food costs of a hospital?

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

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

Strait Co.manufactures office furniture.During the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000.In the month of lowest production the company made 1,125 desks at a cost of $38,000.Using the high-low method of cost estimation, total fixed costs are