Exam 21: Cost-Volume-Profit Analysis

Total variable costs change in direct proportion to changes in the volume of production.

Bryant Company sells glass vases at a wholesale price of $2.6 per unit.The variable cost of manufacture is $0.35 per unit.The monthly fixed costs are $9,000.Bryant's current sales are 25,000 units per month.If Bryant wants to increase operating income by 25%,how many additional units,must Bryant sell? (Round your intermediate calculations to two decimal places. )

Isphase,Inc.has provided the following financial data for the year ended December 31,2017: There are no beginning inventories.Prepare an income statement for the year using the traditional format.

The high-low method requires the identification of lowest and highest levels of total costs,not activity,over a period of time.

Bertrand Enterprises sells computer disks for $1.70 per disk.Unit variable expenses total $0.80.The breakeven point in units is 4,000 and expected sales in units are 4,500.What is the margin of safety in dollars?

Absorption costing considers direct materials,direct labor,variable manufacturing overhead,and fixed manufacturing overhead as product costs.

Franco Company has variable costs of $0.65 per unit of product.In October,the volume of production was 24,000 units and units sold were 23,000.The total production costs incurred were $32,200.What are the fixed costs per month?

Elliott was a professional classical guitar player until his motorcycle accident that left him disabled.After long months of therapy,he hired an experienced luthier (maker of stringed instruments)and started a small shop to make and sell Spanish guitars.The guitars sell for $1,000 and the fixed monthly operating costs are as follows: Elliott's accountant told him about contribution margin ratios and he understood clearly that for every dollar of sales,$0.90 went to cover his fixed costs,and that anything past that point was pure profit. Elliott wishes to earn $5,500 of operating profit each month.Calculate the amount of sales revenue required to achieve the target profit.

Under absorption costing,the more fixed manufacturing overhead in ending Finished Goods Inventory,the larger the Cost of Goods Sold.

Fixed manufacturing overhead is considered a product cost under variable costing.

Variable costing is used for external reporting purposes,and absorption costing is used for internal decision-making purposes.

Miranda was reviewing the water bill for her dog day care and spa and determined that her highest bill,$5,000,occurred in July when she washed 500 dogs and her lowest bill,$3,600,occurred in February when she washed 325 dogs.What was the variable cost per dog associated with Miranda's water bill?

The fundamental assumption of cost-volume-profit (CVP)analysis is that in the long-run fixed costs become variable costs.

Total variable costs change in direct proportion to a change in volume.

Brevard Company sells two products-A and B.Product A is sold for $26 per unit and has a variable cost per unit of $16.Product B is sold for $34 per unit and has a unit variable cost of $21.Total fixed costs for the company are $50,000.Brevard Company typically sells three units of Product A for every unit of Product B.What is the breakeven point in total units?

Cost-volume-profit (CVP)analysis assumes that the selling price per unit does not change as volume changes.

The level of inventory on hand at the end of the year does not affect the amount of operating income calculated under variable costing and absorption costing.

Which of the following statements is true of the behavior of total variable costs,within the relevant range?

Contribution margin is the difference between net sales revenue and variable costs.

Clausen Company sells a product for $70 per unit.Variable costs are $25 per unit and fixed costs are $8,000 per month.Clausen sold 1,000 units in April,2017.Prepare an income statement for April using the contribution margin format.