Exam 5: Cost Volume Profit Analysis

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. Required: If Louis Company expects to sell 44,000 units next year, should they purchase this new equipment?

Given the following cost data, what type of cost is shown?

Define operating leverage.  Explain the relationship between a company's operating leverage and how a change in sales is expected to impact profits.

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

Thompson Company manufactures and sells cookware. Because of current trends, it expects to increase sales by 15% next year. If this expected level of production and sales occurs and plant expansion is not needed, how should this increase affect next year's total amounts for the following costs.                               Variable Costs                                     Fixed Costs                                Mixed Costs

A firm operated at 90% of capacity for the past year, during which fixed costs were $420,000, variable costs were 40% of sales, and sales were $1,000,000. Operating profit was

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: What was Rusty Co.'s weighted average unit selling price?

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

Cost behavior refers to the manner in which

Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $80 per unit. Round your answer to the nearest whole number.

The manufacturing cost of Calico Industries for three months of the year are provided below: Using the high-low method, the variable cost per unit and the total fixed costs are

  Figure 21-1 Which of the graphs in Figure 21-1 illustrates the behavior of a total fixed cost?

The manufacturing cost of Carrie Industries for the first three months of the year are provided below: Using the high-low method, determine: (a) variable cost per unit (b) the total fixed cost.

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60, respectively. Corn has fixed costs of $378,000. The break-even point in units is

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.

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

  Figure 21-1 Which of the graphs in Figure 21-1 illustrates the nature of a mixed cost?

If fixed costs are $650,000 and the unit contribution margin is $30, the sales necessary to earn an operating income of $30,000 are 14,000 units.

The relative distribution of sales among the various products sold by a business is the

Beemer's sales are $400,000, variable costs are 75% of sales, and operating income is $50,000. The operating leverage is