Exam 22: Cost-Volume-Profit

At break-even point, a company sells 1,200 widgets. Its selling price is $6 per widget, variable cost is $2 per widget, and its fixed cost is $4 per widget. Instructions If it sells 100 additional widgets, determine the company's incremental profit.

Unit fixed costs __________________ with the changes in the level of activity.

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

A fixed cost is a cost which

Tommy's Seafood used high-low data from June and July to determine its variable cost of $15 per unit. Additional information follows: If Tommy's produces 2,300 units in August, how much is its total cost expected to be?

Total fixed costs are ___________ over various levels of activities, whereas total variable costs __________________ directly and ________________ with changes in the activity level.

Lowery Company developed the following unit information for January, 2010, its first month of operations: During January, 12,000 units were produced and 9,000 units were sold. Instructions (a) Prepare an income statement under the variable costing approach using the CVP format. (b) What would be the net income (loss) if the absorption cost approach had been used? Explain any income difference between absorption and variable costing.

In the month of September, Thiel Company sold 800 units of product. The average sales price was $30. During the month, fixed costs were $7,200 and variable costs were 60% of sales. Instructions (a) Determine the contribution margin in dollars, per unit, and as a ratio. (b) Using the contribution margin technique, compute the break-even point in dollars and in units.

The Olney Clinic has the following monthly telephone records and costs: Instructions Identify the fixed and variable cost elements using the high-low method.

Select the correct statement concerning the cost-volume-profit graph at right:

Keith Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $12 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?

Knowledge of cost behavior is important in ______________________ analysis.

Under variable costing, ____________________ manufacturing costs are considered to be period costs.

Hermes Company sales are $800,000, cost of goods under absorption costing is $600,000, and total operating expenses are $120,000. If cost of good sold is 70% variable and total operating expenses are 60% fixed, what is the contribution margin under variable costing?

Cost behavior analysis is a study of how a firm's costs

Contribution margin is

At the high level of activity in November, 7,000 machine hours were run and power costs were $12,000. In April, a month of low activity, 2,000 machine hours were run and power costs amounted to $6,000. Using the high-low method, the estimated fixed cost element of power costs is

An example of a mixed cost is

The activity level is represented by an activity index such as direct labor hours, units of output, or sales dollars.

Bess Donuts sells boxes of donuts each with a variable cost percentage of 37.5%. Its fixed costs are $46,875 per year. Instructions Determine the sales dollars Bess needs to break even per year.