Exam 22: Cost-Volume-Profit

Which of the following is not true about the graph of a mixed cost?

Gribble Company's high and low level of activity last year was 60000 units of product produced in May and 20000 units produced in November. Machine maintenance costs were $156000 in May and $60000 in November. Using the high-low method determine an estimate of total maintenance cost for a month in which production is expected to be 45000 units.

The fixed cost element of a mixed cost is the cost of having a service available.

Dunbar Manufacturing's variable costs are 30% of sales. The company is contemplating an advertising campaign that will cost $55000. If sales are expected to increase $100000 by how much will the company's net income increase?

Henderson Farms reports the following results for the month of November: Sales (10,000 units) \ 600,000 Variable costs 420,000 Contribution margin 180,000 Fixed costs 110,000 Net income \ 70,000 Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 5% with no change in total variable costs. 2. Reduce variable costs to 66 % of sales. 3. Reduce fixed costs by $10000. Instructions If maximizing net income is the objective which is the best course of action?

Which of the following would be the least controllable fixed costs?

The contribution margin ratio increases when

Oakbrook Inc. reported actual sales of $2000000 and fixed costs of $350000. The contribution margin ratio is 25%. Instructions Compute the margin of safety in dollars and the margin of safety ratio.

The graph of variable costs that behave in a curvilinear fashion will

A company has total fixed costs of $240000 and a contribution margin ratio of 20%. The total sales necessary to break even are

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.

Changes in activity have a(n) _________ effect on fixed costs per unit.

Reliable Manufacturing wants to sell a sufficient quantity of products to earn a profit of $100000. If the unit sales price is $10 unit variable cost is $8 and total fixed costs are $200000 how many units must be sold to earn income of $100000?

When units produced are greater than units sold income under ________________ costing is higher than under ______________ costing.

When applying the high-low method the variable cost element of a mixed cost is calculated before the fixed cost element.

For CVP analysis both variable and fixed costs are assumed to have a linear relationship within the relevant range of activity.

In evaluating the margin of safety the

The income statement for Bradford Machine Company for 2015 appears below. $\begin{array}{c} \text {BRADFORD MACHINE COMPANY }\\ \text {Income Statement}\\ \text { For the Year Ended December 31, 2015}\\\\\begin{array}{llr} \text { Sales (40,000 units) } &\$1,000,000\\ \text { Variable expenses } &\underline{700,000}\\ \text { Contribution margin } &300,000\\ \text { Fixed expenses} &\underline{360,000}\\ \text { Net income (loss) } &\$(60,000)\\\end{array}\end{array}$ Instructions Answer the following independent questions and show computations using the contribution margin technique to support your answers: 1. What was the company's break-even point in sales dollars in 2015? 2. How many additional units would the company have had to sell in 2016 in order to earn net income of $45000? 3. If the company is able to reduce variable costs by $2.50 per unit in 2016 and other costs and unit revenues remain unchanged how many units will the company have to sell in order to earn a net income of $45000?

Boswell company reported the following information for the current year: Sales (50000 units) $1000000 direct materials and direct labor $500000 other variable costs $50000 and fixed costs $360000. What is Boswell's break-even point in units?

The range over which a company expects to operate is referred to as the _____________ range.