Exam 2: Cost Behavior, Operating Leverage, and Profitability Analysis

Compare least squares regression and the scattergraph method of analyzing mixed costs.

Companies with low operating leverage will experience lower profits when sales increase than will companies with higher operating leverage.

What is a primary disadvantage of the high-low method of analyzing a mixed cost?

The higher the magnitude of a company's operating leverage,the smaller the decrease in profit for a given percentage decrease in revenue.

How does fixed cost per unit behave when volume decreases?

What are mixed or semivariable costs? Give an example of a mixed cost.

Craft,Inc.normally produces between 120,000 and 150,000 units each year.Producing more than 150,000 units alters the company's cost s

For a mixed cost,total cost increases in direct proportion to volume.

Frazier Company sells women's ski jackets.The average sales price is $275 and the variable cost per jacket is $175.Fixed Costs are $1,350,000.If Frazier sells 15,000 jackets,the contribution margin will be:

Select the incorrect statement regarding fixed and variable costs.

Based on the income statements of the three following retail businesses,which company has the highest operating leverage? Alpha Company Beta Company Gamma Company Revenue \ 200,000 \ 200,000 \ 200,000 Variable costs (95,000) (155,000) (125,000) Contribution margin \ 105,000 \ 45,000 \ 75,000 Fixed costs (80,000) (20,000) (50,000) Net income \ 25,000 \ 25,000 \ 25,000

Operating leverage exists when:

Wham Company sells electronic squirrel repellants for $60.Variable costs are 60% of sales and total fixed costs are $40,000.What is the firm's magnitude of operating leverage if 2,000 units are sold?

For the last two years BRC Company had net income as follows: 2012 2013 Net Income \ 160,000 \ 200,000 Change 2012 to Year 1 and 2013 to Year 2 What was the percentage change in income from Year 1 to Year 2?

Two different costs incurred by Ruiz Company exhibit the following behavior pattern per unit: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Units Sold }$ 50 100 150 200 Cost \#1 \ 300 per unit \ 150 per unit \ 100 per unit \ 75 per unit Cost \# 2 \ 2 per unit \ 2 per unt \ 2 per unit \ 2 per unit Cost #1 and Cost #2 exhibit which of the following cost behavior patterns,respectively?

Select the incorrect statement regarding the relevant range of volume.

What total amount of net income will Harlowe,Inc.earn if it experiences a 10 percent increase in revenue?

Based on the above data,which company has a higher operating leverage?

The following information is for Companies M and N for the most recent year: Company M Company N Sales \ 500,000 \ 500,000 Variable costs \ 300,000 \ 200,000 Fixed costs \ 50,000 \ 150,000 Based on this information,which of the following statements is incorrect?

If the company's volume doubles,the company's total cost will: