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Exam 21: Cost Behavior and Cost-Volume-Profit Analysis

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Question 91

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Unit variable cost does not change as the number of units of activity changes.

A) True
B) False

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Question 92

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The point in operations at which revenues and expired costs are exactly equal is called the break-even point.

A) True
B) False

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Question 93

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If variable costs per unit decreased because of a decrease in utility rates, the break-even point would:

If the volume of sales is $6,000,000 and sales at the break-even point amount to $4,800,000, the margin of safety is 25%.

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

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 Harold Corporations net income for 2012 using absorption costing?

Total fixed costs change as the level of activity changes.

If fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24, what is the break-even sales (unit ) if the variable costs are decreased by $2?

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.

As production increases, what should happen to the variable costs per unit?

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

The graph of a variable cost when plotted against its related activity base appears as a:

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

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%.

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

If sales are $525,000, variable costs are 53% of sales, and operating income is $50,000, what is the contribution margin ratio?

For the coming year, River Company estimates fixed costs at $109,000, the unit variable cost at $21, and the unit selling price at $85. Determine (a) the break-even point in units of sales, (b) the unit sales required to realize operating income of $150,000 and (c) the probable operating income if sales total $500,000. Round units to the nearest whole number and percentage to one decimal place.

Carmelita Company sells 40,000 units at $18 per unit. Fixed costs are $62,000 and income from operations is $258,000. Determine the (a) variable cost per unit, (b) unit contribution margin, and (c) contribution margin ratio .

If sales are $400,000, variable costs are 75% of sales, and operating income is $50,000, what is the operating leverage?

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