Question 1

Klein Company reports the following data:  Determine Klein Company's operating leverage. Round your answer to two decimal places.

Accepted Answer

The answer of Klein Company reports the following data: ...

Question 2

The contribution margin ratio is the

Accepted Answer

A) same as the variable cost ratio 
B) same as profit 
C) portion of equity contributed by the stockholders 
D) same as the profit-volume ratio

Question 3

The graph of a variable cost when plotted against its related activity base appears as a

Accepted Answer

A) circle 
B) rectangle 
C) straight line 
D) curved line

Question 4

If yearly insurance premiums are increased, this change in fixed costs will result in an increase in the break-even point.

Accepted Answer

A) True 
 B)False

Question 5

In a cost-volume-profit chart, the

Accepted Answer

A) total cost line begins at zero 
B) slope of the total cost line is dependent on the fixed cost per unit 
C) total cost line begins at the total fixed cost value on the vertical axis 
D) total cost line normally ends at the highest sales value

Question 6

A business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed costs of $240,000, a break-even point of $960,000, and operating income of $60,000 for the current year. Compute the current year's sales.

Accepted Answer

The answer of A business had a margin of safety...

Question 7

Cost behavior refers to the manner in which a cost

Accepted Answer

A) changes as the related activity changes 
B) is allocated to products 
C) is used in setting selling prices 
D) is estimated

Question 8

Match each of the following costs of producing T-shirts with the appropriate classification (a-c).
-Salaries of internal pattern designers
A)Variable cost
B)Fixed cost
C)Mixed cost

Accepted Answer

The answer of Match each of the following costs of...

Question 9

Unit variable cost does not change as the number of units of activity changes.

Accepted Answer

A) True 
 B)False

Question 10

Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. The break-even sales (units) is

Accepted Answer

A) 2,400 units 
B) 1,950 units 
C) 1,114 units 
D) 2,600 units

Question 11

Which of the following describes the behavior of a variable cost per unit?

Accepted Answer

A) It varies in increasing proportion with changes in the activity level. 
B) It varies in decreasing proportion with changes in the activity level. 
C) It remains constant with changes in the activity level. 
D) It varies in direct proportion with the activity level.

Question 12

Given the following:
Variable cost as a percentage of sales = 60%
Unit variable cost = $30
Fixed costs = $200,000
What is the break-even point in units?

Accepted Answer

The answer of Given the following:
Variable cost as a percentage...

Question 13

Match each of the following costs of producing T-shirts with the appropriate classification (a-c).
-Accounting salaries
A)Variable cost
B)Fixed cost
C)Mixed cost

Accepted Answer

The answer of Match each of the following costs of...

Question 14

Strait Co. manufactures office furniture. During the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000. In the month of lowest production, the company made 1,125 desks at a cost of $38,000. Using the high-low method of cost estimation, total fixed costs are

Accepted Answer

A) $21,000 
B) $25,400 
C) $42,000 
D) $13,000

Question 15

Match each of the following costs with the graph (a-e) that best portrays its cost behavior as the number of units produced and sold increases.     
-Total employer pension costs of $0.35 per direct labor hour
A)Graph 1
B)Graph 2
C)Graph 3
D)Graph 4
E)Graph 5

Accepted Answer

The answer of Match each of the following costs with...

Question 16

Copper Hill Inc. manufactures laser printers within a relevant range of production of 70,000 to 100,000 printers per year. The following partially completed manufacturing cost schedule has been prepared:  Complete the preceding cost schedule, identifying each cost by the appropriate letter (a) through (o).

Accepted Answer

The answer of Copper Hill Inc. manufactures laser printers within...

Question 17

With respect to cost-volume-profit analysis for service companies, a cost may be defined as fixed or variable, depending on the unit of analysis.

Accepted Answer

A) True 
 B)False

Question 18

If fixed costs are $561,000 and the unit contribution margin is $8.00, the break-even point in units if variable costs are decreased by $0.50 per unit is

Accepted Answer

A) 66,000 units 
B) 70,125 units 
C) 74,800 units 
D) 60,000 units

Question 19

The break-even point is not as relevant in a service company as it is in a manufacturing company.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 20: Cost-Volume-Profit Analysis

Klein Company reports the following data: Determine Klein Company's operating leverage. Round your answer to two decimal places.

The contribution margin ratio is the

The graph of a variable cost when plotted against its related activity base appears as a

If yearly insurance premiums are increased, this change in fixed costs will result in an increase in the break-even point.

In a cost-volume-profit chart, the

A business had a margin of safety ratio of 20%, variable costs of 75% of sales, fixed costs of $240,000, a break-even point of $960,000, and operating income of $60,000 for the current year. Compute the current year's sales.

Cost behavior refers to the manner in which a cost

Match each of the following costs of producing T-shirts with the appropriate classification (a-c). -Salaries of internal pattern designers A)Variable cost B)Fixed cost C)Mixed cost

Unit variable cost does not change as the number of units of activity changes.

Kaden Company's fixed costs are $46,800, the unit selling price is $42, and the unit variable costs are $24. The break-even sales (units) is

Which of the following describes the behavior of a variable cost per unit?

Given the following: Variable cost as a percentage of sales = 60% Unit variable cost = $30 Fixed costs = $200,000 What is the break-even point in units?

Match each of the following costs of producing T-shirts with the appropriate classification (a-c). -Accounting salaries A)Variable cost B)Fixed cost C)Mixed cost

Strait Co. manufactures office furniture. During the most productive month of the year, 3,000 desks were manufactured at a total cost of $59,000. In the month of lowest production, the company made 1,125 desks at a cost of $38,000. Using the high-low method of cost estimation, total fixed costs are

Match each of the following costs with the graph (a-e) that best portrays its cost behavior as the number of units produced and sold increases. -Total employer pension costs of $0.35 per direct labor hour A)Graph 1 B)Graph 2 C)Graph 3 D)Graph 4 E)Graph 5

With respect to cost-volume-profit analysis for service companies, a cost may be defined as fixed or variable, depending on the unit of analysis.

If fixed costs are $561,000 and the unit contribution margin is $8.00, the break-even point in units if variable costs are decreased by $0.50 per unit is

The break-even point is not as relevant in a service company as it is in a manufacturing company.

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