Exam 23: Cost Behavior Analysis

a. Provide two different ways of computing breakeven units: one with the contribution margin in the computation and one without the contribution margin. b. Compare and contrast the two different methods of computing breakeven units. Does the use of the contribution margin alter the resulting number of breakeven units? Why or why not? c. Comment on how the contribution margin affects the computation of breakeven units. Would an increase in the contribution margin increase or decrease the number of breakeven units required?

How many total dollars of sales must BAC Company sell to break even if the selling price per unit is $8.50, variable costs are $4.00 per unit, and fixed costs are $9,000?

Walton's Warehouse reported sales of $640,000, a contribution margin of $8 per unit, fixed costs of $314,000, and a profit of $92,000. How many units did Walton's Warehouse sell?

If the contribution margin on a new product line is $15, fixed costs are $165,000, and the total market for the product is 22,000 units, then the breakeven analysis would recommend that the company

Dick Sports, Inc.'s, income statement data for last year is as follows: Sales revenue \ 200,000 Variable costs 140,000 Fixed costs 30,000 Operating income 18,000 What is Dick's breakeven point in dollars?

Manix Company has gathered the following data: Unit Sales Price Unit Variable Costs Unit Sales Product 1 \ 18.00 \ 10.00 24,500 Product 2 27.00 17.00 17,500 Product 3 35.00 28.00 28,000 Fixed costs are $233,280. The weighted-average breakeven point is

A scatter diagram helps to determine if a linear relationship exists between a cost item and its related activity measure.

If Oui Watches sells 300 watches at $48 per watch and has variable costs of $20 per watch and fixed costs of $4,000, what is the projected profit?

If fixed costs are $180,000, variable costs are $38 per unit, and the product sells for $70, the breakeven point in sales dollars is $393,750.

A crystal goblet sells for $50 per goblet. The contribution margin per goblet is $14. Total monthly fixed costs are estimated to be $82,600. The monthly breakeven point in goblets is

Practical capacity is theoretical or ideal capacity reduced by normal and anticipated work stoppages, such as machine breakdowns.

Suppose a company rents a building for $250,000 a year for the purpose of manufacturing between 80,000 and 140,000 units (the relevant range of activity). The rental cost per unit of production will __________ as production levels increase.

Native American Pottery expects to earn a profit of $95,000 in 20xx. The company manufactures ornamental ceramic tiles. Each lot of 100 blocks requires variable costs of $5.00 for direct materials, $3.50 for direct labor, and $4.50 for overhead. Total variable costs are thus $13 per lot. Fixed costs for 20xx are expected to be $130,000. Each hundred-block lot will sell for $33. a. Determine how many lots of ceramic tiles the company must sell to earn its targeted profit, and convert this amount to sales dollars. b. Compute breakeven sales in dollars. c. Explain the dollar difference between breakeven sales dollars and the sales dollars necessary to earn the targeted profit. Use the contribution margin as part of your explanation.

Cost behavior is the way prices are adjusted due to changes in costs.

If fixed costs are increased, then a breakeven analysis with an adjustment for profit will yield an increase in the number of sales or targeted sales units.

Edward Cheezer's makes and sells frozen four-cheese pizzas, New York-style. The expected selling price is $10 per pizza. The projected variable cost per pizza is $6. The estimated fixed costs per month are $10,000. If 6,000 pizzas are sold in a given month and fixed costs increase by $5,000, the overall profit is

The delivery trucks of Italiana's Pizzeria incurred maintenance costs of $2,400 during its busiest month of 20xx, in which 8,000 miles were driven collectively. During its slowest month, $1,800 in maintenance costs were incurred, resulting from 5,000 miles being driven. Using the high-low method, what maintenance cost would the company expect to incur at 5,350 miles of driving?

The weighted-average contribution margin is computed by multiplying each product's unit contribution margin by the sales mix percentage of each product.

SHARE is trying to determine how many clients must be serviced in order to cover its monthly service overhead. Using the high-low method, it has determined that the variable cost per client is $800 and that the monthly fixed overhead is $28,000. Assuming an average fee of $1,200 per client, the breakeven point per month is

When fixed costs are $41,500, the variable cost is $12 per unit, and the product sells for $22 per unit, the breakeven point is