Question 1

Figure 21-1
-Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

Accepted Answer

A)  direct labor 
B)  salary of a factory supervisor 
C)  units-of-production depreciation on factory equipment 
D)  direct materials 
A)  direct labor 
B)  salary of a factory supervisor 
C)  units-of-production depreciation on factory equipment 
D)  direct materials

Question 2

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

Accepted Answer

A)  mixed costs and variable costs 
B)  sunk costs and fixed costs 
C)  discretionary costs and sunk costs 
D)  variable costs and fixed costs 
A)  mixed costs and variable costs 
B)  sunk costs and fixed costs 
C)  discretionary costs and sunk costs 
D)  variable costs and fixed costs

Question 3

What would be the difference in Timmer's net income for the year if it used variable costing instead of absorption costing?

Accepted Answer

A)  no difference 
B)  $2,000 greater 
C)  $4,000 less 
D)  $6,000 less 
A)  no difference 
B)  $2,000 greater 
C)  $4,000 less 
D)  $6,000 less

Question 4

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

Accepted Answer

A)  Both costs are constant when considered on a per-unit basis. 
B)  Both costs are constant when considered on a total basis. 
C)  Fixed costs are constant in total, and variable costs are constant per unit. 
D)  Variable costs are constant in total, and fixed costs vary in total. 
A)  Both costs are constant when considered on a per-unit basis. 
B)  Both costs are constant when considered on a total basis. 
C)  Fixed costs are constant in total, and variable costs are constant per unit. 
D)  Variable costs are constant in total, and fixed costs vary in total.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while fixed costs are $75,000. Determine the a) break-even point in sales units, and b) break-even point in sales units if the selling price increased to $100 per unit.

Accepted Answer

a. SP $90 - VC $40 = CM $50 pe

Question 7

As production increases, the fixed cost per unit

Accepted Answer

A)  increases 
B)  decreases 
C)  remains the same 
D)  either increases or decreases, depending on the variable costs 
A)  increases 
B)  decreases 
C)  remains the same 
D)  either increases or decreases, depending on the variable costs

Question 8

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

Accepted Answer

A)  decrease 
B)  increase 
C)  remain the same 
D)  increase or decrease, depending upon the percentage increase in wage rates 
A)  decrease 
B)  increase 
C)  remain the same 
D)  increase or decrease, depending upon the percentage increase in wage rates

Question 9

The Tom Company reports the following data:
Sales
$600,000
Variable costs
400,000
Fixed costs
100,000
Determine Tom Company's operating leverage.

Accepted Answer

$600,000 - $400,000)

Question 10

Lee Industry sales are $525,000, variable costs are 53% of sales, and operating income is $19,000. What is the contribution margin ratio?

Accepted Answer

A)  47% 
B)  26.5% 
C)  9.5% 
D)  53% 
A)  47% 
B)  26.5% 
C)  9.5% 
D)  53%

Question 11

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below.   The sales mix for product X and Y is 60% and 40%, respectively. Determine the break-even point in units of X and Y.

Accepted Answer

Unit contribution margin of sa

Question 12

Racer Industries has fixed costs of $900,000. Selling price per unit is $250, and variable cost per unit is $130.
Required:
a) How many units must Racer sell in order to break even?
b) How many units must Racer sell in order to earn a profit of $480,000?
c) A new employee suggests that Racer Industries sponsor a 10K marathon as a form of advertising. The cost to sponsor the event is $7,200. How many more units must be sold to cover this cost?

Accepted Answer

a) $900,000/$250 - $130) = 7,5

Question 13

If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable costs are $110, what is the amount of sales required to realize an operating income of $200,000?

Accepted Answer

A)  9,231 units 
B)  12,000 units 
C)  10,769 units 
D)  5,833 units 
A)  9,231 units 
B)  12,000 units 
C)  10,769 units 
D)  5,833 units

Question 14

If Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. What is the break-even sale units)?

Accepted Answer

A)  2,400 
B)  1,950 
C)  1,114 
D)  2,600 
A)  2,400 
B)  1,950 
C)  1,114 
D)  2,600

Question 15

Piper Technology's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?

Accepted Answer

A)  14,167 units 
B)  12,500 units 
C)  16,000 units 
D)  11,538 units 
A)  14,167 units 
B)  12,500 units 
C)  16,000 units 
D)  11,538 units

Question 16

Costs that remain constant in total dollar amount as the level of activity changes are called

Accepted Answer

A)  fixed costs 
B)  mixed costs 
C)  product costs 
D)  variable costs 
A)  fixed costs 
B)  mixed costs 
C)  product costs 
D)  variable costs

Question 17

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

Accepted Answer

A) True 
 B)False

Question 18

Jacob Inc. has fixed costs of $240,000, the unit selling price is $32, and the unit variable costs are $20. What are the old and new break-even sales units) if the unit selling price increases by $4?

Accepted Answer

A)  7,500 units and 6,667 units 
B)  20,000 units and 30,000 units 
C)  20,000 units and 15,000 units 
D)  12,000 units and 15,000 units 
A)  7,500 units and 6,667 units 
B)  20,000 units and 30,000 units 
C)  20,000 units and 15,000 units 
D)  12,000 units and 15,000 units

Question 19

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: $$\begin{array} { l l l l } 
& \text { Unit Selling } & \text { Unit Variable } & \text { Unit Contribution } \
\text { Product } & \text { Price } & \text { Cost } & \text { Margin } \
\hline \text { Arks } & \$ 120 & \$ 80 & \$ 40 \
\text { Bins } & 80 & 60 & 20
\end{array}$$
-What was Carter Co.'s unit contribution margin of E?

Accepted Answer

A)  $24 
B)  $60 
C)  $92 
D)  $20 
A)  $24 
B)  $60 
C)  $92 
D)  $20

Question 20

Which of the following conditions would cause the break-even point to increase?

Accepted Answer

A)  total fixed costs decrease 
B)  unit selling price increases 
C)  unit variable cost decreases 
D)  unit variable cost increases 
A)  total fixed costs decrease 
B)  unit selling price increases 
C)  unit variable cost decreases 
D)  unit variable cost increases

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

Figure 21-1 -Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

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

What would be the difference in Timmer's net income for the year if it used variable costing instead of absorption costing?

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

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

Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while fixed costs are $75,000. Determine the a) break-even point in sales units, and b) break-even point in sales units if the selling price increased to $100 per unit.

As production increases, the fixed cost per unit

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

The Tom Company reports the following data: Sales $600,000 Variable costs 400,000 Fixed costs 100,000 Determine Tom Company's operating leverage.

Lee Industry sales are $525,000, variable costs are 53% of sales, and operating income is $19,000. What is the contribution margin ratio?

Bobby Company has fixed costs of $160,000. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. The sales mix for product X and Y is 60% and 40%, respectively. Determine the break-even point in units of X and Y.

If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable costs are $110, what is the amount of sales required to realize an operating income of $200,000?

If Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. What is the break-even sale units)?

Piper Technology's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?

Costs that remain constant in total dollar amount as the level of activity changes are called

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

Jacob Inc. has fixed costs of $240,000, the unit selling price is $32, and the unit variable costs are $20. What are the old and new break-even sales units) if the unit selling price increases by $4?

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: Unit Selling Unit Variable Unit Contribution Product Price Cost Margin Arks \ 120 \ 80 \ 40 Bins 80 60 20 -What was Carter Co.'s unit contribution margin of E?

Which of the following conditions would cause the break-even point to increase?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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