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

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Question 61

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If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 14,500 units.

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B) False

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Question 62

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Direct materials cost that varies with the number of units produced is an example of a fixed cost of production.

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B) False

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Question 63

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The fixed cost per unit varies with changes in the level of activity.

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

Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will operating income change if sales increase by 5,000 units?

If fixed costs are $500,000, the unit selling price is $55, and the unit variable costs are $30, what is the break-even sales (units) if fixed costs are increased by $80,000?

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.

Which of the graphs in Figure 20-1 illustrates the nature of a mixed cost?

If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs are $20, what is the break-even sales (units) if fixed costs are reduced by $40,000?

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60 respectively. Corn has fixed costs of $378,000. The break-even point in units is:

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.

The relevant range is useful for analyzing cost behavior for management decision-making purposes.

Total fixed costs change as the level of activity changes.

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?

If fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have a zero profit?

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

Assuming no other changes, operating income will be the same under both the variable and absorption costing methods when the number of units manufactured equals the number of units sold.

If variable costs per unit increased because of an increase in hourly wage rates, the break-even point would:

In an absorption costing income statement, the manufacturing margin is the excess of sales over the variable cost of goods sold.

The dollars available from each unit of sales to cover fixed cost and profit is the unit variable cost.