Exam 20: Cost-Volume-Profit Analysis

The systematic examination of the relationships among selling prices, volume of sales and production, costs, and profits is termed _____ analysis.

The reliability of cost-volume-profit analysis does not depend on the assumption that costs can be accurately divided into fixed and variable components.

Figure 1 ​ -Which of the following graphs in Figure 1 illustrates the nature of a mixed cost?

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating income (loss) was

Match each of the following costs with the graph (a-e) that best portrays its cost behavior as the number of units produced and sold increases. -Straight-line depreciation on factory equipment A)Graph 1 B)Graph 2 C)Graph 3 D)Graph 4 E)Graph 5

A low operating leverage is normal for highly automated industries.

Given the following cost and activity observations for George Company's utilities, use the high-low method to determine George's variable utilities cost per machine hour.

Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

Grant Company has sales of $300,000, and the break-even point in sales dollars is $225,000. Determine the company's margin of safety percentage.

Figure 1 ​ -Which of the following graphs in Figure 1 illustrates the behavior of a total variable cost?

Atlantic Company sells a product with a break-even point of 3,000 sales units. The variable cost is $60 per unit, and fixed costs are $270,000.​ Determine the (a) unit sales price and (b) break-even point in sales units if the company desires a target profit of $36,000.

Louis Company sells a single product at a price of $65 per unit. Variable costs per unit are $45, and total fixed costs are $625,500. Louis is considering the purchase of a new piece of equipment that would increase the fixed costs to $800,000 but decrease the variable costs per unit to $42.If Louis Company expects to sell 44,000 units next year, should it purchase this new equipment?

For the past year, Pedi Company had fixed costs of $70,000, unit variable costs of $32, and a unit selling price of $40. For the coming year, no changes are expected in revenues and costs, except that property taxes are expected to increase by $10,000. Determine the break-even sales (units) for (a) the past year and (b) the coming year.

Bluegill Company sells 45,000 units at $18 per unit. Fixed costs are $62,000, and operating income is $298,000. Determine the (a) variable cost per unit, (b) unit contribution margin, and (c) contribution margin ratio.

Which of the following is an example of a mixed cost?

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is

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

Rusty Co. sells two products: X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are as follows: ​ -For break-even analysis, the unit variable cost of E was

Match each of the following costs of producing T-shirts with the appropriate classification (a-c). -Advertising costs of $12,000 per month A)Variable cost B)Fixed cost C)Mixed cost

Given the following costs and activities for Dance Company's electrical costs, use the high-low method to determine Dance's variable electrical costs per machine hour.