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

Assuming no other changes, operating income will be the same under both the variable and absorption costing methods when the number of units manufactured equals the number of units sold.

The manufacturing cost of Prancer Industries for three months of the year are provided below: Using the high-low method, the variable cost per unit, and the total fixed costs are:

If the unit selling price is $40, the volume of sales is $3,000,000, sales at the break-even point amount to $2,500,000, and the maximum possible sales are $3,300,000, the margin of safety is 14,500 units.

For the coming year, River Company estimates fixed costs at $109,000, the unit variable cost at $21, and the unit selling price at $85. Determine (a) the break-even point in units of sales, (b) the unit sales required to realize operating income of $150,000 and (c) the probable operating income if sales total $500,000. Round units to the nearest whole number and percentage to one decimal place.

If sales are $820,000, variable costs are 45% of sales, and operating income is $260,000, what is the contribution margin ratio?

Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are: What was Carter Co.'s sales mix last year?

A rental cost of $20,000 plus $.70 per machine hour of use is an example of a mixed cost.

Variable costs are costs that vary on a per-unit basis with changes in the activity level.

A mixed cost has characteristics of both a variable and a fixed cost.

The relative distribution of sales among the various products sold by a business is termed the:

The ratio that indicates the percentage of each sales dollar available to cover the fixed costs and to provide operating income is termed the contribution margin ratio.

If direct materials cost per unit increases, the break-even point will decrease.

Which of the following conditions would cause the break-even point to increase?

If the contribution margin ratio for France Company is 45%, sales were $425,000. and fixed costs were $100,000, what was the income from operations?

If employees accept a wage contract that increases the unit contribution margin, the break-even point will decrease.

The data required for determining the break-even point for a business are the total estimated fixed costs for a period, stated as a percentage of net sales.

If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable costs are $110, what is the amount of sales required to realize an operating income of $200,000?

If direct materials cost per unit decreases, the amount of sales necessary to earn a desired amount of profit will decrease.

The cost graphs in the illustration below shows various types of cost behaviors. For each of the following costs, identify the cost graph that best describes its cost behavior as the number of units produced and sold increases:

Carter Co. sells two products, Arks and Bins. Last year Carter sold 14,000 units of Arks and 56,000 units of Bins. Related data are: What was Carter Co.'s weighted average variable cost?