Question 1

A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

Accepted Answer

A)  $90,000 
B)  $210,000 
C)  $590,000 
D)  $490,000

Question 2

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

Accepted Answer

A) True 
 B)False

Question 3

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: 
0 What was Carter Co.'s weighted average unit contribution margin?

Accepted Answer

A)  $24 
B)  $60 
C)  $92 
D)  $20

Question 4

Douglas Company has a contribution margin ratio of 30%. If Douglas has $336,420 in fixed costs, what amount of sales will need to be generated in order for the company to break even?

Accepted Answer

The answer of Douglas Company has a contribution margin ratio...

Question 5

Calzone Co. has budgeted salary increases to factory supervisors totaling 8%. If selling prices and all other cost relationships are held constant, next year's break-even point:

Accepted Answer

A)  will decrease by 8% 
B)  will increase by 8% 
C)  cannot be determined from the data given 
D)  will increase at a rate greater than 8%

Question 6

If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs are $20, what is the break-even sales (units) if fixed costs are reduced by $40,000?

Accepted Answer

A)  32,667 units 
B)  14,000 units 
C)  30,000 units 
D)  24,500 units

Question 7

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

Accepted Answer

A)  0 
B)  1.25 
C)  1.3 
D)  3.1

Question 8

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

Accepted Answer

A)  the maximum possible operating loss 
B)  the maximum possible operating income 
C)  the total fixed costs 
D)  the break-even point

Question 9

The Waterfall Company sells a product for $150 per unit. The variable cost is $80 per unit, and fixed costs are $270,000. Determine the (a) break-even point in sales units, and (b) break-even points in sales units if the company desires a target profit of $36,000. Round your answer to the nearest whole number.

Accepted Answer

The answer of The Waterfall Company sells a product for...

Question 10

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 contribution margin?

Accepted Answer

A)  $60.00 
B)  $20.00 
C)  $40.00 
D)  $22.50

Question 11

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

Accepted Answer

A) True 
 B)False

Question 12

If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point.

Accepted Answer

A) True 
 B)False

Question 13

Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will operating income change if sales increase by 5,000 units?

Accepted Answer

A)  $125,000 decrease 
B)  $175,000 increase 
C)  $75,000 increase 
D)  $247,500 increase

Question 14

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

Question 15

If sales are $525,000, variable costs are 53% of sales, and operating income is $50,000, what is the contribution margin ratio?

Accepted Answer

A)  47% 
B)  26.5% 
C)  9.5% 
D)  53%

Question 16

Trail Bikes, Inc. sells three Deluxe bikes for every seven Standard bikes. The Deluxe bike sells for $1,800 and has variable costs of $1,200. The Standard bike sells for $600 and has variable costs of $200.
Required:
A. If Trail Bikes has fixed costs that total $1,702,000, how many bikes must be sold in order for the company to break even?
B. How many of these bikes will be Deluxe bikes and how many will be the Standard bikes?

Accepted Answer

The answer of Trail Bikes, Inc. sells three Deluxe bikes...

Question 17

If fixed costs increased and variable costs per unit decreased, the break-even point would:

Accepted Answer

A)  increase 
B)  decrease 
C)  remain the same 
D)  cannot be determined from the data provided

Question 18

Which of the following activity bases would be the most appropriate for food costs of a hospital?

Accepted Answer

A)  Number of cooks scheduled to work 
B)  Number of x-rays taken 
C)  Number of patients who stay in the hospital 
D)  Number of scheduled surgeries

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

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

A firm operated at 80% of capacity for the past year, during which fixed costs were $210,000, variable costs were 70% of sales, and sales were $1,000,000. Operating profit was:

A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.

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: 0 What was Carter Co.'s weighted average unit contribution margin?

Douglas Company has a contribution margin ratio of 30%. If Douglas has $336,420 in fixed costs, what amount of sales will need to be generated in order for the company to break even?

Calzone Co. has budgeted salary increases to factory supervisors totaling 8%. If selling prices and all other cost relationships are held constant, next year's break-even point:

If fixed costs are $490,000, the unit selling price is $35, and the unit variable costs are $20, what is the break-even sales (units) if fixed costs are reduced by $40,000?

If sales are $500,000, variable costs are 75% of sales, and operating income is $40,000, what is the operating leverage?

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

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 contribution margin?

Only a single line, which represents the difference between total sales revenues and total costs, is plotted on the cost-volume-profit chart.

If the property tax rates are increased, this change in fixed costs will result in a decrease in the break-even point.

Zipee Inc.'s unit selling price is $90, the unit variable costs are $40.50, fixed costs are $170,000, and current sales are 12,000 units. How much will operating income change if sales increase by 5,000 units?

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?

If sales are $525,000, variable costs are 53% of sales, and operating income is $50,000, what is the contribution margin ratio?

If fixed costs increased and variable costs per unit decreased, the break-even point would:

Which of the following activity bases would be the most appropriate for food costs of a hospital?

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

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