Question 1

As production increases, what would you expect to happen to fixed cost per unit?

Accepted Answer

A)  Increase 
B)  Decrease 
C)  Remain the same 
D)  Either increase or decrease, depending on the variable costs 
A)  Increase 
B)  Decrease 
C)  Remain the same 
D)  Either increase or decrease, depending on the variable costs

Question 2

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

Accepted Answer

A)  $140,000 
B)  ($30,000) 
C)  $370,000 
D)  $670,000 
A)  $140,000 
B)  ($30,000) 
C)  $370,000 
D)  $670,000

Question 3

The Tom Company reports the following data.
   Determine Tom Company's operating leverage.

Accepted Answer

2.0 = ($600,000 - $4

Question 4

If fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20, what is the break-even sales (units)?

Accepted Answer

A)  12,800 units 
B)  4,571 units 
C)  16,000 units 
D)  7,111 units 
A)  12,800 units 
B)  4,571 units 
C)  16,000 units 
D)  7,111 units

Question 5

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. This is called:

Accepted Answer

A)  "What if" or sensitivity analysis 
B)  vary the data analysis 
C)  computer aided analysis 
D)  data gathering 
A)  "What if" or sensitivity analysis 
B)  vary the data analysis 
C)  computer aided analysis 
D)  data gathering

Question 6

For the current year ending January 31, Harp Company expects fixed costs of $188,500 and a unit variable cost of $51.50. For the coming year, a new wage contract will increase the unit variable cost to $55.50. The selling price of $70.00 per unit is expected to remain the same.
   Round your answer to the nearest whole number.

Accepted Answer

The answer of For the current year ending January 31,...

Question 7

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

Accepted Answer

A)  0 
B)  7.500 
C)  2.0 
D)  1.333 
A)  0 
B)  7.500 
C)  2.0 
D)  1.333

Question 8

The fixed cost per unit varies with changes in the level of activity.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?

Accepted Answer

A)  Electricity per KWH to operate factory equipment 
B)  Direct materials cost 
C)  Insurance premiums on factory building 
D)  Wages of assembly worker 
A)  Electricity per KWH to operate factory equipment 
B)  Direct materials cost 
C)  Insurance premiums on factory building 
D)  Wages of assembly worker

Question 10

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60 respectively. Corn has fixed costs of $378,000. The break-even point in units is:

Accepted Answer

A)  8,000 units 
B)  6,300 units 
C)  12,600 units 
D)  10,500 units 
A)  8,000 units 
B)  6,300 units 
C)  12,600 units 
D)  10,500 units

Question 11

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 12

Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are:   What was Rusty Co.'s sales mix last year?

Accepted Answer

A)  58% X's, 42% Y's 
B)  60% X's, 40% Y's 
C)  30% X's, 70% Y's 
D)  12.5% X's, 87.5% Y's 
A)  58% X's, 42% Y's 
B)  60% X's, 40% Y's 
C)  30% X's, 70% Y's 
D)  12.5% X's, 87.5% Y's

Question 13

Global Publishers has collected the following data for recent months:
   Required:
a. Using the high-low method, find variable cost per unit, total fixed costs, and the total cost equation.
b. What is the estimated cost for a month in which 19,000 issues are published?

Accepted Answer

a. Variable cost per unit = ($22,464 - $

Question 14

If fixed costs are $700,000 and the unit contribution margin is $17, what amount of units must be sold in order to realize an operating income of $100,000?

Accepted Answer

A)  5,000 
B)  41,176 
C)  47,059 
D)  58,882 
A)  5,000 
B)  41,176 
C)  47,059 
D)  58,882

Question 15

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

Accepted Answer

A) True 
 B)False

Question 16

Given the following information:
Variable cost per unit = $5.00
July fixed cost per unit = $7.00
Units sold and produced in July 25,000
What is total estimated cost for August if 30,000 units are projected to be produced and sold?

Accepted Answer

Total Fixed costs = $7.00 ´ 25

Question 17

If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point in sales dollars?

Accepted Answer

A)  $1,250,000 
B)  $450,000 
C)  $1,875,000 
D)  $300,000 
A)  $1,250,000 
B)  $450,000 
C)  $1,875,000 
D)  $300,000

Question 18

Cost behavior refers to the manner in which a cost changes as the related activity changes.

Accepted Answer

A) True 
 B)False

Question 19

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.

Accepted Answer

A)  $1,533 
B)  $2,530 
C)  $22,800 
D)  $50,600 
A)  $1,533 
B)  $2,530 
C)  $22,800 
D)  $50,600

Question 20

If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?

Accepted Answer

A)  30,000 units 
B)  8,710 units 
C)  12,273 units 
D)  20,000 units 
A)  30,000 units 
B)  8,710 units 
C)  12,273 units 
D)  20,000 units

Exam 19: Cost Behavior and Cost-Volume-Profit Analysis

As production increases, what would you expect to happen to fixed cost per unit?

A firm operated at 80% of capacity for the past year, during which fixed costs were $330,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

The Tom Company reports the following data. Determine Tom Company's operating leverage.

If fixed costs are $256,000, the unit selling price is $36, and the unit variable costs are $20, what is the break-even sales (units)?

With the aid of computer software, managers can vary assumptions regarding selling prices, costs, and volume and can immediately see the effects of each change on the break-even point and profit. This is called:

If sales are $400,000, variable costs are 80% of sales, and operating income is $40,000, what is the operating leverage?

The fixed cost per unit varies with changes in the level of activity.

Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?

Assume that Corn Co. sold 8,000 units of Product A and 2,000 units of Product B during the past year. The unit contribution margins for Products A and B are $30 and $60 respectively. Corn has fixed costs of $378,000. The break-even point in units is:

Rental charges of $40,000 per year plus $3 for each machine hour over 18,000 hours is an example of a fixed cost.

Rusty Co. sells two products, X and Y. Last year Rusty sold 5,000 units of X's and 35,000 units of Y's. Related data are: What was Rusty Co.'s sales mix last year?

Global Publishers has collected the following data for recent months: Required: a. Using the high-low method, find variable cost per unit, total fixed costs, and the total cost equation. b. What is the estimated cost for a month in which 19,000 issues are published?

If fixed costs are $700,000 and the unit contribution margin is $17, what amount of units must be sold in order to realize an operating income of $100,000?

Cost behavior refers to the methods used to estimate costs for use in managerial decision making.

Given the following information: Variable cost per unit = $5.00 July fixed cost per unit = $7.00 Units sold and produced in July 25,000 What is total estimated cost for August if 30,000 units are projected to be produced and sold?

If fixed costs are $750,000 and variable costs are 60% of sales, what is the break-even point in sales dollars?

Cost behavior refers to the manner in which a cost changes as the related activity changes.

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to calculate Smithson's fixed costs per month. Do not round your intermediate calculations.

If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Cost Management for Just-In-Time Environments

Filters