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Exam 19: Cost Behavior and Cost-Volume-Profit Analysis

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Question 61

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Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are: Assuming that last year's fixed costs totaled $960,000, what was Carter Co.'s break-even point in units?

A) 40,000 units
B) 12,000 units
C) 35,000 units
D) 28,000 units

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

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Question 62

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Variable costs are costs that remain constant on a per-unit basis as the level of activity changes.

A) True
B) False

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Question 63

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Break-even analysis is one type of cost-volume-profit analysis.

The Rocky Company reports the following data. Rocky Company's operating leverage is:

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

If fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are $73, what is the break-even sales (units) ?

If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.

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

Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

If the volume of sales is $7,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 45.8%.

In cost-volume-profit analysis, all costs are classified into the following two categories:

When units manufactured exceed units sold:

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

If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 60%.

Which of the following statements is true regarding fixed and variable costs?

Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $80 per unit. Round your answer to the nearest whole number.

Total fixed costs change as the level of activity changes.

Define operating leverage. Explain the relationship between a company's operating leverage and how a change in sales is expected to impact profits.

The relevant activity base for a cost depends upon which base is most closely associated with the cost and the decision-making needs of management.