Exam 11: Cost Behavior and Cost-Volume-Profit Analysis

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

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

Clinton Co. has an operating leverage of 4. Sales are expected to increase by 8% next year. Operating income is:

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

If sales total $5,000,000, fixed costs total $400,000, and variable costs are 2,750,000, the contribution margin ratio is 45%.

If fixed costs are $850,000 and the unit contribution margin is $90, what amount of units must be sold in order to have a zero profit?

A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of $1,000,000. (a) What was the break-even point? (b) What was the operatingincome? (c) If neither the relationship between variable costs and salesnor the amount of fixed costs is expected to change in the next year; how (c) much additional operating income can be earned by increasing sales by $\$ 110,000$ ?

A firm operated at 90% of capacity for the past year during which fixed costs were $320,000, variable costs were 60% of sales, and sales were $1,200,000. Operating profit was:

Variable cost per unit remains the same regardless of activity level.

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

Cost behavior refers to the manner in which:

Costs that vary in total in direct proportion to changes in an activity level are called:

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

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

The point where the profit line intersects the left vertical axis on the profit-volume chart represents:

Costs that remain constant on a per-unit level as the level of activity changes are called:

For the current year ending January 31, Ringo Company expects fixed costs of $178,500 and a unit variable cost of $41.50. For the coming year, a new wage contract will increase the unit variable cost to $45. The selling price of $50 per unit is expected to remain the same. (a)Compute the break-even sales (in units) for the current year. (b)Compute the anticipated break-even sales (in units) for the coming year; assumuing the new wage contract is signed.

If the unit selling price is $50, the volume of sales is $450,000, sales at the break-even point amount to $375,000, and the maximum possible sales are $550,000, the margin of safety will be 2,000 units.

Which of the following describes the behavior of the fixed cost per unit?

If sales total $2,000,000, fixed costs total $600,000, and variable costs are 60% of the sales, the contribution margin ratio is 40%.