Exam 11: Cost-Volume-Profit Analysis

If sales total $1,000,000, fixed costs total $200,000, and variable costs are 55% of the sales, the contribution margin ratio is 55%.

The _____ indicates the percentage of each sales dollar available to cover fixed costs and to provide operating income.

Kennedy Co.sells two products, Arks and Bins.Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins.Related data are: ?? Unit Unit Unit Selling Variable Contribution Product Price Cost Margin Arks \ 80 \ 20 \ 60 Bins 120 40 80 ? What was Kennedy's overall product's unit variable cost?

The point where the profit line intersects the left vertical axis on the profit-volume graph represents:

Cost-volume-profit analysis cannot be used if which of the following occurs?

The contribution margin ratio is the same as the variable cost ratio.

The point where the sales line and the total costs line intersect on the cost-volume-profit graph represents:

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

The following is a list of various costs of producing sweatshirts.Classify each cost as either a variable, fixed, or mixed cost for units produced and sold. (a)Electricity costs of $0.025 per kilowatt-hour (b)Warehouse rent of $6,000 per month plus $0.50 per square foot of storage used (c)Thread (d)Zip used in sweatshirts (e)Janitorial costs of $2,000 per month (f)Advertising costs of $10,000 per month (g)Plant manager salary (h)Color dyes for producing different colors of sweatshirts (i)Salary of the production supervisor (j)Straight-line depreciation on sewing machines (k)Patterns for different designs.Patterns typically last many years before being replaced (l)Maintenance costs for the company's sewing machine.The cost is $2,000 per year plus $0.001 for each machine hour of use (m)Property taxes on factory, building, and equipment (n)Cotton and polyester cloth (o)Hourly wages of sewing machine operators

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 will be 12,500 units.

Clinton Co.has an operating leverage of 4.Sales are expected to increase by 8% next year.Operating income is:

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

Assume that Bisque Co.sold 12,000 units of Product A and 18,000 units of Product B in the last year.The unit contribution margins for Products A and B are $10 and $20 respectively.Bisque has fixed costs of $420,000.The break-even point in units is:

Variable costs are costs that vary on a per-unit basis as the level of manufacturing activity changes.

Kennedy Co.sells two products, Arks and Bins.Last year, Kennedy sold 32,000 units of Arks and 18,000 units of Bins.Related data are: ? Unit Unit Unit Selling Variable Contribution Product Price Cost Margin Arks \ 80 \ 20 \ 60 Bins 120 40 80 ? What was Kennedy's overall product's unit selling price?

_____ is the excess of sales over variable costs.

If direct materials cost per unit decreases, the break-even point will increase.

Tucker Co.manufactures office furniture.During the most productive month of the year, 3,600 desks were manufactured at a total cost of $192,000.In its slowest month, the company made 1,200 desks at a cost of $72,000.Using the high-low method of cost estimation, total fixed costs per month are:

Snower Corporation sells product G for $150 per unit, the variable cost per unit is $105, and the fixed costs are $720,000.What is the sales (in dollars) required to realize operating income of $40,000?

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