Exam 21: Cost-Volume-Profit Analysis

Henderson Co. has fixed costs of $36,000 and a contribution margin ratio of 24%. If expected sales are $200,000, what is the margin of safety as a percent of sales?

As the level of volume of activity increases, the variable cost per unit remains constant.

The margin of safety can be expressed in units of product, in dollars, or as a percent of sales.

Variable costs per unit increase proportionately with increases in volume of activity.

Ludington Corporation provides the following data from a recent period for its manufacture of shoes: variable manufacturing costs, $24,000; variable selling costs, $12,000; and total fixed costs, $40,000. Sales were $60,000 based on 12,000 units sold during the period. Calculate the contribution margin and the contribution margin ratio.

The margin of safety is the amount that sales can drop before the company incurs a loss.

Briefly describe a CVP chart, including its major components.

The least-squares regression method is:

A graphic depiction of the break-even point is known as a cost-volume-profit (CVP) chart.

What is a scatter diagram? How is a scatter diagram used to estimate cost behavior?

Which one of the following statements is not true?

Which of the following costs are most likely to be classified as variable?

A company's product sells at $12 per unit and has a $5 per unit variable cost. The company's total fixed costs are $98,000. The contribution margin per unit is:

Watson Company has monthly fixed costs of $83,000 and a 40% contribution margin ratio. If the company has set a target monthly income of $15,000, what dollar amount of sales must be made to produce the target income?

When using the high-low method for estimating cost behavior, the slope, or variable cost per unit, is calculated by ________.

A company manufactures and sells a product for $120 per unit. The company's fixed costs are $68,760, and its variable costs are $90 per unit. -The company's break-even point in units is:

The unit contribution margin divided by the selling price per unit is the ________.

Contribution margin per unit is the amount by which a product's unit selling price exceeds its total variable cost per unit.

A manufacturer reports the following costs to produce 10,000 units in its first year of operations: Direct materials, $10 per unit, Direct labor, $6 per unit, Variable overhead, $70,000, and Fixed overhead, $120,000. - Of the 10,000 units produced, 9,200 were sold, and 800 remain in inventory at year-end. Under absorption costing, the value of the inventory is:

A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past cost and unit data.