Exam 2: Introduction to Cost Behavior and Cost-Volume Relationships

Deadwood Hospital has overall variable costs of 50% of total revenues and fixed costs of $40 million per year.There are 40,000 patient-days estimated for next year.The break-even point expressed in total revenue is _____.

The CVP graph shows profit and loss at any rate of activity.

Gross margin is the same as contribution margin.

A key factor in controlling costs is associating costs with activities.

Berea Company currently sells 19,000 units.Total fixed costs are $84,000, and the contribution margin per unit is $6.00.Berea's tax rate is 40%.The margin of safety in units is _____.

If the sales price per unit is $180, variable cost per unit is $100, targeted net income is $52,800, and total fixed costs are $39,600, the number of units that must be sold is _____.

Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room hotel, average daily room rents of $50, and average variable costs of $10 for each room rented.It operates 365 days per year.The amount of net income on rooms that will be generated if the hotel is completely full throughout the entire year is _____.

Assume the following cost information for Andrew Company: Selling price per unit \ 144 Variable costs per unit \ 80 Total fixed costs \ 80,000 Tax rate 40\% _____ must be sold to earn an after-tax net income of $40,800.

At the break-even point, net income may be positive.

When analyzing costs, two rules of thumb are useful: 1) think of fixed costs on a per-unit basis; and 2) think of variable costs as a total.

Which value chain function would include advertising costs?

A firm's ratio of fixed to variable costs

The relationship between sales and variable costs

Another name for gross profit

After a certain point, a unit sold does not generate marginal income.

Which value chain function would include the cost of computer-aided design equipment and cost to develop the prototype of a product?

The margin of safety shows how far sales can fall below the planned level of sales before losses occur.

Cost of goods sold is the cost of the merchandise that a company acquires or produces and then sells.

Gross profit margin is the sales price minus the variable cost per unit.

Gross margin focuses on sales in relation to variable cost.