Exam 2: Introduction to Cost Behavior and Cost-Volume Relationships

Assuming a constant mix of 3 units of Zip for every 1 unit of Zap, a selling price of $21.60 for Zip and $28.80 for Zap, variable costs per unit of $14.40 for Zip and $16.80 for Zap, and total fixed costs of $53,760, the break?even point in units would be _____.

The sales price minus the cost of goods sold

Which of the following statements about highly leveraged companies is true?

Mercy Hospital has total variable costs of 80% of total revenues and fixed costs of $20 million per year.There are 70,000 patient-days estimated for next year.What is the break-even point expressed in total revenue?

The relevant range is the limit of cost-driver activity within which a specific relationship between costs and the cost driver is valid.

_____ is the excess of sales over the cost of goods sold.

The following information is for Donald Corporation: Total fixed costs \ 333,500 Variable costs per unit \ 99 Selling price per unit \ 154 If total fixed costs increased to $394,850, then break-even volume in dollars would increase by _____.

Target sales volume in units = variable expenses + target net income) / unit contribution margin.

The vertical axis of the CVP graph

Suppose a Holiday Inn Hotel has annual fixed costs applicable to its rooms of $1.2 million for its 300-room hotel, average daily room rents of $50, and average variable costs of $10 for each room rented.It operates 365 days per year.The amount of net income on rooms that will be generated if the hotel is half full throughout the entire year is _____.

An increase in sales price would cause a decrease in the break?even point.

An assumption of the CVP analysis is that the difference in inventory level at the beginning and at the end of a period is insignificant.

A classmate is having difficulty understanding two sets of accounting terms, variable and fixed costs, as opposed to period and product costs.He understands that variable costs change during an accounting period while fixed costs do not.However, he explains that a period cost implies that it is for a period of time and is, therefore, also fixed.Does his assumption imply that all product costs are variable? Required: Assist your classmate in being able to distinguish between these terms.

Break-even volume in dollars = variable costs / contribution-margin ratio.

The change in total results such as revenue, expenses, or income) under a new condition in comparison with some given or known condition

Hug Me Company produces dolls.Each doll sells for $20.00.Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor.If the break-even volume in dollars is $1,446,000, then the total fixed costs for the period must be _____.

The benefits of increased accuracy of using a computer model in CVP analysis always exceed the costs.

Highly leveraged companies are less risky than companies with low leverage.

Walnut Corporation sells desks at $480 per desk.The costs associated with each desk are as follows: Direct materials \ 195 Direct labor 126 Variable factory overhead 51 Total fixed costs for the period are $456,840.The contribution margin per desk is _____.

Gross margin = sales price - cost of goods sold.