Question 1

Practical capacity and normal capacity are synonymous terms.

Accepted Answer

A) True 
 B)False

Question 2

Normal capacity is the average annual level of operating capacity needed to meet expected sales demand.

Accepted Answer

A) True 
 B)False

Question 3

Ditex is a manufacturer of digital cameras and is preparing production and sales forecasts for the coming fiscal year. The company needs to determine the point at which the projected sales revenue will equal the total of all fixed and variable costs. Fixed costs are estimated to be $314,390, and variable costs are expected to be maintained at $150 per camera. Each camera will sell for $299. Compute (a) the breakeven point in sales units and (b) the breakeven point in sales dollars.

Accepted Answer

The answer of Ditex is a manufacturer of digital cameras...

Question 4

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

Accepted Answer

A) True 
 B)False

Question 5

The high-low method

Accepted Answer

A)  calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs. 
B)  assumes that the fixed portion of the mixed cost is the lowest monthly cost incurred during the period under consideration. 
C)  allows differentiation between fixed and variable costs when dealing with mixed costs. 
D)  combines the fixed and variable portions of a cost to determine the total cost. 
A)  calculates variable costs per unit by dividing the difference in the high and low activity levels by the high and low costs. 
B)  assumes that the fixed portion of the mixed cost is the lowest monthly cost incurred during the period under consideration. 
C)  allows differentiation between fixed and variable costs when dealing with mixed costs. 
D)  combines the fixed and variable portions of a cost to determine the total cost.

Question 6

Using the contribution margin approach, find the breakeven point in units for Consumer Products if the selling price per unit is $12, the variable cost per unit is $6, and the fixed costs are $8,040.

Accepted Answer

A)  670 
B)  1,200 
C)  1,340 
D)  6,000 
A)  670 
B)  1,200 
C)  1,340 
D)  6,000

Question 7

Unit variable costs vary with changes in productive output, whereas total variable costs remain constant.

Accepted Answer

A) True 
 B)False

Question 8

Retleb Manufacturing Company noticed that, during its busiest month of 20xx, maintenance costs totaled $15,400, resulting from the production of 32,000 units. During its slowest month, $12,600 in maintenance costs were incurred, resulting from the production of 24,000 units. Using the high-low method, what maintenance cost would the company expect to incur at a volume of 20,000 units?

Accepted Answer

A)  $7,000 
B)  $11,200 
C)  $8,400 
D)  $2,800 
A)  $7,000 
B)  $11,200 
C)  $8,400 
D)  $2,800

Question 9

You have calculated, using the high-low method, a variable cost per machine hour of $0.80 for your production power costs. Power costs at 6,000 machine hours are $5,400; at 9,000 machine hours, they are $7,800. What are the total fixed costs that you would use to estimate production power costs for your company at any level within your relevant range?

Accepted Answer

A)  $600 
B)  $6,400 
C)  $2,400 
D)  $4,800 
A)  $600 
B)  $6,400 
C)  $2,400 
D)  $4,800

Question 10

If a company wishes to evaluate the likelihood of success with a new product line, the breakeven point will provide information about the average amount of profit the company will make.

Accepted Answer

A) True 
 B)False

Question 11

Excerpts from a cost-volume-profit analysis indicate fixed costs of $87,000, a contribution margin per unit of $35, a selling price of $90, and a sales level of 4,000 units. What must be the targeted level of profit?

Accepted Answer

A)  $43,000 
B)  $68,000 
C)  $140,000 
D)  $53,000 
A)  $43,000 
B)  $68,000 
C)  $140,000 
D)  $53,000

Question 12

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $24,120. The breakeven point in sales dollars is

Accepted Answer

A)  $48,240. 
B)  $32,160. 
C)  $56,280. 
D)  $40,200. 
A)  $48,240. 
B)  $32,160. 
C)  $56,280. 
D)  $40,200.

Question 13

Loren, Inc., sold 30,000 units of its product last year with the following results:
   The company expects variable costs to increase by $4.00 per unit this year. 
a. Assuming the unit sale price remains constant, compute the unit contribution margin and the contribution margin ratio for this year.
b. Given the expected change in variable costs, how many units will have to be sold this year to earn the same operating income as last year?
c. Assuming the company is willing to raise the unit sales price but wants the contribution margin to be the same as last year, determine the unit sales price the company must charge to cover the expected increase in variable costs.

Accepted Answer

a.
 @#IMG-DLM& b. Desired unit sales = ($190,000 +

Question 14

Contribution margin (CM) is the amount that remains after all fixed costs are subtracted from sales.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements most accurately explains the behavior of costs?

Accepted Answer

A)  There is no norm; rather, costs can be fixed, variable, or a combination of both. 
B)  The majority of costs are variable per unit of production. 
C)  The majority of costs are fixed per unit of production. 
D)  Costs can be fixed or variable but usually not a combination of both. 
A)  There is no norm; rather, costs can be fixed, variable, or a combination of both. 
B)  The majority of costs are variable per unit of production. 
C)  The majority of costs are fixed per unit of production. 
D)  Costs can be fixed or variable but usually not a combination of both.

Question 16

Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity: $\begin{array}{lrr} 
& \begin{array}{r}
\text { Total Service } \
\text { Overhead }
\end{array} & \text { Cases Worked } \
\text { March } & \$ 22,900 & 112 \
\text { April } & 20,800 & 98 \
\text { May } & 26,400 & 138 \
\hline
\end{array}$ The formula for total service overhead costs is

Accepted Answer

A)  $5,600 + $140 per case. 
B)  $5,600 + $40 per case. 
C)  $7,823 + $134.62 per case. 
D)  $7,080 + $140 per case. 
A)  $5,600 + $140 per case. 
B)  $5,600 + $40 per case. 
C)  $7,823 + $134.62 per case. 
D)  $7,080 + $140 per case.

Question 17

A project breaks even when total revenue less all costs is equal to zero.

Accepted Answer

A) True 
 B)False

Question 18

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in units?

Accepted Answer

A)  43,200 units 
B)  9,900 units 
C)  26,182 units 
D)  20,000 units 
A)  43,200 units 
B)  9,900 units 
C)  26,182 units 
D)  20,000 units

Question 19

Trawest, Inc., has prepared the following data: $\begin{array}{rrrr} 
& \text { Unit Sales Price } & \text { Unit Variable Costs } & \text { Unit Sales } \
\text { Product A } & \$ 34.00 & \$ 20.00 & 35,000 \
\text { Product B } & 26.00 & 14.50 & 7,000 \
\text { Product C } & 18.00 & 10.50 & 14,000 \
\end{array}$ The sales mix for Products A, B, and C is

Accepted Answer

A)  62.5 percent, 12.5 percent, and 25 percent, respectively. 
B)  100 percent, 20 percent, and 40 percent, respectively. 
C)  100 percent, 25 percent, and 50 percent, respectively. 
D)  44 percent, 33 percent, and 23 percent, respectively. 
A)  62.5 percent, 12.5 percent, and 25 percent, respectively. 
B)  100 percent, 20 percent, and 40 percent, respectively. 
C)  100 percent, 25 percent, and 50 percent, respectively. 
D)  44 percent, 33 percent, and 23 percent, respectively.

Question 20

Denapasa Manufacturing leases a vacuum cleaning system for a basic monthly fee plus an additional cost per hour used above a given minimum for each month. Given below is the information for the most recent six-month period on the number of machine hours of use and the total cost under this lease.
   You are to provide information for planning on the variable and fixed cost elements in this lease. Use the high-low method to (a) determine the variable cost per machine hour and (b) compute the fixed and variable costs for months 7 and 8.

Accepted Answer

a.
 @#IMG-DLM& The variable cost per mac

Exam 23: Cost Behavior Analysis

Practical capacity and normal capacity are synonymous terms.

Normal capacity is the average annual level of operating capacity needed to meet expected sales demand.

Cost-volume-profit analysis cannot be used to estimate a targeted profit for service businesses.

The high-low method

Using the contribution margin approach, find the breakeven point in units for Consumer Products if the selling price per unit is $12, the variable cost per unit is $6, and the fixed costs are $8,040.

Unit variable costs vary with changes in productive output, whereas total variable costs remain constant.

If a company wishes to evaluate the likelihood of success with a new product line, the breakeven point will provide information about the average amount of profit the company will make.

Excerpts from a cost-volume-profit analysis indicate fixed costs of $87,000, a contribution margin per unit of $35, a selling price of $90, and a sales level of 4,000 units. What must be the targeted level of profit?

The new Corina watch has an expected selling price per watch of $42, the projected variable cost per unit is $24, and estimated fixed costs per month are $24,120. The breakeven point in sales dollars is

Contribution margin (CM) is the amount that remains after all fixed costs are subtracted from sales.

Which of the following statements most accurately explains the behavior of costs?

Field Legal Services is trying to determine the variable and fixed elements of its service overhead. The following data have been collected from recent activity: Total Service Overhead Cases Worked March \ 22,900 112 April 20,800 98 May 26,400 138 The formula for total service overhead costs is

A project breaks even when total revenue less all costs is equal to zero.

Christian Company's sales revenue for 20xx was $144,000. Christian's product sells for $5.50 and has a 30 percent contribution margin. Christian has fixed costs of $33,000. What is Christian Company's breakeven point in units?

Trawest, Inc., has prepared the following data: Unit Sales Price Unit Variable Costs Unit Sales Product A \ 34.00 \ 20.00 35,000 Product B 26.00 14.50 7,000 Product C 18.00 10.50 14,000 The sales mix for Products A, B, and C is

Uses of Accounting Information and the Financial Statements

Analyzing Business Transactions

Measuring Business Income

Completing the Accounting Cycle

Financial Reporting and Analysis

The Operating Cycle and Merchandising Operations

Internal Control

Inventories

Cash and Receivables

Current Liabilities and Fair Value Accounting

Long Term Assets

Contributed Capital

Long Term Liabilities

The Corporate Income Statement and the Statement of Stockholders Equity

The Statement of Cash Flows

Financial Performance Measurement

Partnerships

The Changing Business Environment-A Managers Pers

Cost Concepts and Cost Allocation

Costing Systems: Job Order Costing

Costing Systems Process Costing

Activity-Based Systems-Abm and Lean

The Budgeting Process

Performance Management and Evaluation

Standard Costing and Variance Analysis

Short Run Decision Analysis

Capital Investment Analysis

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