Exam 17: Cost-Volume-Profit

Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?

A company requires $1,700,000 in sales to meet its net income target. Its contribution margin is 30%, and fixed costs are $300,000. What is the target net income?

An assumption of CVP analysis is that all costs can be classified as either variable or fixed.

The trend in most companies is to have more variable costs and fewer fixed costs.

The contribution margin ratio is calculated by multiplying the unit contribution margin by the unit sales price.

The margin of safety is the difference between sales at breakeven and sales at a determined activity level.

Fixed costs normally will not include

The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.

The margin of safety ratio is equal to the margin of safety in dollars divided by the actual or (expected) sales.

To which function of management is CVP analysis most applicable?

If a firm increases its activity level,

If Qualls Quality Airline cuts its domestic fares by 30%,

A mixed cost contains

If the activity level increases 10%, total variable costs will

In the Restin Company, maintenance costs are a mixed cost. At the low level of activity (80 direct labor hours), maintenance costs are $600. At the high level of activity (200 direct labor hours), maintenance costs are $1,100. Using the high-low method, what is the variable maintenance cost per unit and the total fixed maintenance cost? Variable Cost PerUnit Total Fixed Cost a. \ 4.17 \ 267 b. \ 4.17 \ 500 c. \ 5.50 \ 220 d. \ 5.50 \ 400

Wilton Co. reported the following results from the sale of 5,000 hammers in May: sales $200,000, variable costs $120,000, fixed costs $60,000, and net income $20,000. Assume that Wilton increases the selling price of hammers by 10% on June 1. How many hammers will have to be sold in June to maintain the same level of net income?

For an activity base to be useful in cost behavior analysis,

If the unit contribution margin is $1 and unit sales are 10,000 units above the break-even volume, then net income will be $10,000.

Which of the following costs are variable? Cost 10,000 Units 30,000 Units 1. \ 100,000 \ 300,000 2. 40,000 240,000 3. 90,000 90,000 4. 50,000 150,000

Which of the following is not an underlying assumption of CVP analysis?