Question 1

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 2

The reliability of cost-volume-profit analysis does NOT depend on the assumption that costs can be accurately divided into fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 3

Gladstorm Enterprises sells a product for $60 per unit. The variable cost is $20 per unit, while fixed costs are $85,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $80 per unit. Round your answer to the nearest whole number.

Accepted Answer

a. SP $60 - VC $20 = CM $40
$8

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  Total fixed costs increase 
B)  Unit selling price decreases 
C)  Unit variable cost decreases 
D)  Unit variable cost increases 
A)  Total fixed costs increase 
B)  Unit selling price decreases 
C)  Unit variable cost decreases 
D)  Unit variable cost increases

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

Accepted Answer

A)  Direct labor 
B)  Salary of a factory supervisor 
C)  Units of production depreciation on factory equipment 
D)  Direct materials 
A)  Direct labor 
B)  Salary of a factory supervisor 
C)  Units of production depreciation on factory equipment 
D)  Direct materials

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 weighted average unit variable cost?

Accepted Answer

A)  $52.50 
B)  $70.00 
C)  $120.00 
D)  $50.00 
A)  $52.50 
B)  $70.00 
C)  $120.00 
D)  $50.00

Question 13

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

Accepted Answer

A)  6,000 units and 5,294 units 
B)  18,000 units and 6,000 units 
C)  18,000 units and 12,858 units 
D)  9,000 units and 15,000 units 
A)  6,000 units and 5,294 units 
B)  18,000 units and 6,000 units 
C)  18,000 units and 12,858 units 
D)  9,000 units and 15,000 units

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The following is a list of various costs of producing sweatshirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.

Accepted Answer

The answer of The following is a list of various...

Question 16

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

Accepted Answer

A)  Total fixed costs increase 
B)  Unit selling price increases 
C)  Unit variable cost decreases 
D)  Total fixed costs decrease 
A)  Total fixed costs increase 
B)  Unit selling price increases 
C)  Unit variable cost decreases 
D)  Total fixed costs decrease

Question 17

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 18

If fixed costs are $600,000 and the unit contribution margin is $40, what is the break-even point if fixed costs are increased by $90,000?

Accepted Answer

A)  17,250 
B)  15,000 
C)  8,333 
D)  9,667 
A)  17,250 
B)  15,000 
C)  8,333 
D)  9,667

Question 19

Knowing how costs behave is useful to management for all the following reasons except for

Accepted Answer

A)  predicting customer demand. 
B)  predicting profits as sales and production volumes change. 
C)  estimating costs. 
D)  changing an existing product production. 
A)  predicting customer demand. 
B)  predicting profits as sales and production volumes change. 
C)  estimating costs. 
D)  changing an existing product production.

Question 20

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is:

Accepted Answer

A)  unaffected 
B)  expected to increase by 3% 
C)  expected to increase by 48% 
D)  expected to increase by 4 % 
A)  unaffected 
B)  expected to increase by 3% 
C)  expected to increase by 48% 
D)  expected to increase by 4 %

Exam 21: Cost Behavior and Cost-Volume-Profit Analysis

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)?

The reliability of cost-volume-profit analysis does NOT depend on the assumption that costs can be accurately divided into fixed and variable components.

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

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

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

Because variable costs are assumed to change in direct proportion to changes in the activity level, the graph of the variable costs when plotted against the activity level appears as a circle.

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

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:

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

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

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 weighted average unit variable cost?

If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

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

The following is a list of various costs of producing sweatshirts. Classify each cost as either a variable, fixed, or mixed cost for units produced and sold.

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

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

If fixed costs are $600,000 and the unit contribution margin is $40, what is the break-even point if fixed costs are increased by $90,000?

Knowing how costs behave is useful to management for all the following reasons except for

Forde Co. has an operating leverage of 4. Sales are expected to increase by 12% next year. Operating income is:

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting Systems

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Accounting for Partnerships and Limited Liability Companies

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

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

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